|Market Growth LT||null|
|Market Growth ST||D|
Dismal Growth Indicators Denote Very Difficult Operating Conditions and an Uncertain Outlook
China CeramicsLtd. recently posted a 4.11% decline in quarterly revenue for the period ended on April 24, 2013, with total sales of $60.82 million million compared to $63.42 million a year before. Including this latest figure the company's 12-month trailing sales were $0.00 million, which we cannot compare to equivalent figures for the period ended three or two years ago because of insufficient data like we usually do. The company also reported in its latest earnings announcement a year-over-year drop in profits. Our measure of long term profit growth, which usually compares full year (12-month trailing) net income growth over a three year period was, in China CeramicsLtd.'s case, limited to a two year comparison for a lack of sufficient publicly available financials going far enough back. MISSED CASE The company's small year-to-year margin expansion during its last quarter, with cash flow, operating and net margins rising by an average 4.67%, extends a trend from its two previous quarters.
Investors sold off the stock after the company's Third quarter earnings missed analysts' consensus estimates by 83.33%. Following the April 24, 2013 announcement, the stock tumbled 14.83% from the day before to the day after the report. This report worsened its earnings surprise record, having missed the consensus estimate by an average of 9.77% over the last six reported quarters.
|Price/Cash Flow Ratio||A+|
The Stock's Valuation is Attractive Based on the Company's Overall Financial Strength
China CeramicsLtd.'s stock is trading presently at 0.96 times trailing 12-month earnings per share, which represents a 93.21% discount to the company's "optimum" P/E ratio of 14.13; this ratio is calculated by MarketGrader based on the company's two-year EPS growth rate, which in turn is computed by looking at the rolling 12-month periods ended in each quarter within the two years and measuring their growth. By this measure, China CeramicsLtd.'s earnings per share have grown at an annualized rate of -19.76% in the last two years. The company's recent margin expansion and healthy Profitability indicators might help reverse this negative growth rate, which would in turn provide some support for the stock. The stock is also valued at 0.00 times the company's forward earnings estimates for the next four quarters, which means that it trades below its trailing P/E and the market's forward P/E of 15.20 (based on earnings estimates for the S&P 500). Therefore investors may see the current valuation as fully reflecting the company's EPS growth prospects and its current fundamentals.
China CeramicsLtd.'s current market value is lower than its tangible book value, which means either that investors think the company is overstating the value of its assets or they are undervaluing the the stock. Its tangible book value per share is $11.10 (this measure excludes goodwill and other intangible assets), which translates into a price to book ratio of 0.19. The company's intangible book value makes up 0.26% of its total stockholders' equity. The stock's price to total book value ratio is 0.19. The price of the stock is only 0.94 times the $2.25 in cash flow per share generated by the company in the last four quarters. While on its own this appears to be an attractive valuation, it seems investors are assigning little value to the company's future earnings prospects in light of its overall poor fundamentals. Its shares also trade at 0.17 times its trailing 12-month sales, a small 100.00% discount to the Real Estate Development industry average price to sales ratio of 6535.94. Our final value indicator looks at the relationship between the company's current market capitalization and its operating profits after deducting taxes. By this measure China CeramicsLtd. is priced very attractively with a total value of $43.31 million , only 3.08 times higher than its latest quarterly net income plus depreciation.
|Return on Equity||B|
|Quality of Revenues||A+|
Company's Operations Are Very Profitable and Indicate a Solid Business Environment
China CeramicsLtd. has a strong 12-month trailing profitability record based on solid returns on shareholder equity, operating margins that exceed its peer group average and a remarkable net profit margin. The $50.91 million net profit earned by the company in the last four quarters was equivalent to 20.12% of total sales. The average operating margin for the Real Estate Development industry was 19.55% during the same period, 23.49% below the company's 27.96%. While China CeramicsLtd.'s 22.40% return on equity is solid--based on 12-month trailing earnings--it represents a slowdown from the year-earlier period's return on equity of 23.45%. Our system looks at this ratio in an attempt to measure management's efficiency in rewarding investors in the company's common stock.
Despite this moderate downturn the company's leverage is low enough that it could be increased without overburdening the company in order to ensure that current profitanility is sustained. Its total debt is only 0.04 times total equity while long term debt makes up 3.38% of total capital. China CeramicsLtd.'s core earnings in the last twelve months grew moderately from the twelve months ended a year earlier. The company's EBITDA for the most recent period was $80.82 million, or 29.12% above the $62.60 million earned from its core operations in the prior period. EBITDA is used by MarketGrader to measure the company's true earnings power since it includes interest expenses, income taxes, depreciation and amortization, all non-operating expenses, which are nevertheless accounted for in other parts of our analysis that look at EPS gains and net income.
|Cash Flow Growth||A+|
|Debt/Cash Flow Ratio||A+|
|Interest Cov. Capacity||A-|
Company's Cash Flow Is Very Well Managed as Our Analysis Reflects a Very Healthy Operation
China CeramicsLtd. reported a 41.19% growth in cash flow during the latest quarter to $15.38 million, an impressive increase from the $10.90 million in the same period last year. This is significantly lower than the 103.06% growth in twelve month trailing cash flow, an indication of a sharp slowdown in the company's core operating income and overall business environment. Even though the company has $9.55 million in total debt, its net debt is virtually zero since it has $19.51 million in cash on hand; and since it generated $18.29 million in earnings before interest, taxes, depreciation and amortization last quarter, it's safe to say its liquidity is remarkable. Therefore the company's debt is not only very manageable with its own cash flow but could be increased if it wanted to pursue strategic growth opportunities. The company also has the ability to enhance shareholder returns through dividends or by repurchasing its own shares, boosting the future value of its earnings. Even more positive is the fact that during the last 12 months while the company's cash on hand increased 156.64% from last year's $7.60 million, its leverage actually fell, with total debt as a percentage of total capital now at 4.03% compared to 15.10% a year ago.
MarketGrader also measures the true economic profit generated by China CeramicsLtd. during the past year by taking into account not only the costs of operating the business but also the cost of capital, both equity and debt. Based on 12-month trailing operating income, China CeramicsLtd. had a total 30.07% return on $235.27 million of total invested capital, which includes common and preferred equity as well as long term debt. Its total after tax cost of capital is heavily weighted towards equity, with a total after tax cost of 12.76% compared to a 0.49% cost of debt. The company's economic value added (EVA), which results from subtracting the 13.25% total cost of capital from its return on investment, is 16.82%. This is a solid return to shareholders for a one year period. China CeramicsLtd. does not pay a dividend and hasn't done so within at least the last five years.