The stock IPO'd just last November and has since then fell from its IPO price of $16.50 to a low of $4.03 (a 75.5% decrease). The latest fall in price came as a result of the COO's resignation.
On Friday, a class action lawsuit was filed which could lead to new lows next week, but the lower trading prices may be seen as a fantastic buying opportunity by value investors. The industry the company is focused on is very promising as the there are many contributing factors pushing for positive, rapid growth.
First, China has 1.3 billion people with over 900 million living in rural areas, contributing to a tremendous amount of consumption; furthermore, the arable land in China is less than 1ha per household versus 100ha in the US, making the supply/demand ratio highly favorable. Second, Chinese agricultural companies are protected by the government and foreign competition is heavily regulated. Third, consumption has increased across the board for all commodities and is expected to continue as more Chinese people move out of rural areas into urban settings.
As you can see, there is tremendous value in this industry and right now GRO is trading at extremely low levels. The industry P/E is at 20, while GRO's P/E is at a measly 6.60. There will no doubt be investors loading up at these levels as they set their focus on the long term future rather than the intraday trading. Keep an eye on this stock as the swings could bring very nice gains to those who buy the stock when it's low.
$4.19 (04/14/08)
