Watching this one...
During Friday's trading session, China Electric Motor Inc. (NASDAQ: CELM) established a new all-time low at $4.02, sixteen cents below the previous low. The stock began trading in January of last year around $4.50 and reached a high of $9.88 in April. There appears to be no reason for the sell-off, although it could be linked to the 33.4% drop CCME experienced during the same day due to fraud allegations.
CELM is a China-based company that engages in the design, production, marketing and sale of micro motor products through its subsidiaries, Shenzhen YuePengCheng Motor Co., Ltd. and Ningbo Heng Bang Long Electrical Equipment Co., Ltd. The Company's products are incorporated into consumer electronics, automobiles, power tools, toys and household appliances.
Despite 48.90% year-over-year growth in revenues and continued profitability, CELM is now trading at a P/E of 6.1 (the average for the industry is approximately 28). The company is also undervalued by P/S, PEG, Price/Book and Price/Cash Flow. Currently two analysts cover the stock, one with a "Strong Buy" rating and one with a "Buy" rating. The average of their price targets is $9.50.
As of last report, the company had a very strong balance sheet with $75.9 million in total assets and $9.5 million in total liabilities. The management team has also shown great strength in efficiency, returning 28.1% on equity, 24.1% on assets and 28.1% on capital.
In most recent news, the company announced that through an indirect wholly owned subsidiary it will acquire Shenzhen Guofa Optoelectronics Co., Ltd. Through this acquisition, CELM will gain new production lines and expertise focused on high-end DC micro motors as well as a blue chip customer base. The acquisition is expected to be accretive immediately upon the closing.
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