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SUTR Looks Cheap.

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7

October 01, 2009 – Comments (3) | RELATED TICKERS: SUTR

Sutor Technologies is a steel company in India selling galvanized, pickled, and cold-rolled steel.  From just the description, I am led to believe that it may not be a fully integrated steel company.  A fully integrated company would probably sell hot-rolled steel and slabs as well.  The closing price as of 9/30/09 was $3.16.  Financials are available starting from the 12 months ended 2007, so I'll only be going back 3 years for the financials.  Keep in mind the fiscal year for them ends in June, so the 2009 numbers are TTM as well.

EPS:
2007: $0.59
2008: $0.82
2009: $0.49

Ratios from CAPS:
P/S: 0.33
P/B: 0.78
P/TB: 0.80

After the earnings release on 9/25, the price tanked from 9/24's closing of $3.91 to $3.21 on 9/25.  It has stayed depressed, and could fall further if the market tanks.  I see the sudden drop as an irrational reaction to the EPS of $0.03 vs. estimates of $0.10.  I don't think the company's value dropped 18% overnight just because they missed EPS estimates.  It is in the best interest of the value investor to look for these temporary overreactions to missed estimates, in my opinion.

I personally bought some shares at $3.33 on 9/25 when it first tanked, and I will consider buying more in a bit if it stays depressed long enough for me to get more money into the market.  A steel company that has managed to make money the last 5 quarters straight is very rare.  SUTR also looks attractively valued from a value standpoint, with excellent ratios. 

To add to everything else, this company is a net current asset value bargain, for you Graham fans.  Current assets actually aren't made up mostly of inventory, which is another plus.  It does look like there's a chunk of short-term debt or something due from their last quarterly filing, but I'm sure they can handle it.

I didn't research past the financial statements.  Further due diligence is recommended, but I'd say this company is definitely worth the look.

3 Comments – Post Your Own

#1) On October 01, 2009 at 7:40 AM, TMFBabo (100.00) wrote:

After thinking about it for a few minutes, I realized I had forgotten that NCAV bargains are actually stocks where the share price is less than net current asset values.  This is not the case here, but it's still a cheap stock.  It's early, so please forgive me.

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#2) On October 01, 2009 at 7:51 AM, TMFBabo (100.00) wrote:

Holy crap.  They're also based in China, not India.  This blog post = fail.

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#3) On October 01, 2009 at 11:00 AM, ChrisGraley (29.72) wrote:

Might be a real gem given China's investment in infrastructure. I'll have to research this one.

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