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Welcome to Profit Confidential • Tuesday, May 22, 2012

Current Loser Could Become Big Winner

Thursday, July 3rd, 2008
By Mitchell Clark, B.Comm. for Profit Confidential

To say that it’s a difficult equity market out there is an understatement. Wall Street is very unsure of itself in the current environment and it’s not difficult to understand why.

So, I continue to scan the marketplace looking for attractive opportunities and I continue to find undervalued U.S.-listed Chinese stocks that have been really beaten up.

One such company that’s growing solidly in a very familiar business is China Nepstar Chain Drugstore, Ltd. (NYSE/NPD). This company is following a familiar business plan; it’s a drugstore consolidator and it has a lot going for itself.

The company is China’s largest retail drugstore chain based on the number of directly operated stores. As of the end of the first quarter, China Nepstar had 2,249 stores across 73 cities, one headquartered distribution center and 11 regional distribution centers in China.

By owning its stores directly, the company can centralize its procurement and therefore garner substantial buying power. China Nepstar sells pharmaceuticals, over-the-counter drugs, nutritional supplements, herbal products, personal care products, family care products, and convenience products including consumables.

In its latest quarter, the first quarter of 2008, China Nepstar’s revenues grew to seventy-seven million dollars, representing a 17% increase over the first quarter of 2007. Net income for the quarter increased 304% to $8.0 million.

The company finished the quarter with cash and cash equivalents of approximately one hundred and ninety-one million dollars.

China Nepstar listed on the NYSE at an unfortunate time in early November last year. Ever since, its stock price has been declining, and it is now less than half its value as when it listed.

The timing might not be quite right yet, but, eventually, a company like this is going to see its stock price rebound. I’m going to keep my eye on China Nepstar. Like so many other U.S.-listed Chinese stocks, it is undervalued and unappreciated by the marketplace right now. 

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Profit Confidential AuthorMitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.

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