Thursday, August 14, 2008

Gulf Resources (GFRE.OB) - up 40% today. Reversal??

Bulletin Board stocks....YUCK!

But when I see annualized revenue of $100 million, EPS of .25 for the year, a growing market (chinese demand), a license to grow from the government (only 6 companies have Bromine mining licenses and there are TONS of them that are being bought out right now that are NOT licensed. That makes for good prices :) )

GFRE mines/produces Bromine, a chemical used in many daily uses. As some stock became free to sell (previous acquisitions/consulting) apparently it was sold at ALL COST, and hammerred the stock price.

The company has retained a new IR firm, and announced 2Q results earlier today at 100% top line and 100% bottom line growth.
With $0.25 in EPS, good cash flow from operations (negative cash flow due to acquisitions/debt) the company could easily trade at $2.50 to $5.00 based on my calcs (10x to 20x multiple)

Here are some other ways of looking at it

$84 million to $90 million in sales this year with 100 million shares = .84 per share at 1x sales or 1.68 at 2x sales. With EPS of .25 trading at 3x EPS is RIDICULOUS and I think a 10x multiple is conservative, making it a triple from today's closing price of $0.85. I bought 3000 shares at $0.63 the other day, which is looking pretty good right now. Having said that, I bought some on the way down at $.80, .70 and .60. When the stock hit $.48 I thought I was going to throw up as I didn't "know something" but I feel better after seeing the published reports/SEC fililings and new IR firm coming on board.

It took the stock 11 days to decline from 1.80 to .60 and the company DID NOT comment at all, which was VERY frustrating for investors. I am very curious to see where the stock will end up in a month or two from now but, after today's EPS results were announced, the stock jumped 40%. I think a run to $1.00 seems quick and $1.20 seems possible in the next few days. I would love to see $1.80 in eleven trading days (just like the decline) but I don't know how many buyers will come out of the woodwork to buy the stock.

Dan Ross

No comments: