Top PEG Value Plays for 2010 – NEP, CRTX, GFRE

China North East Petroleum Holding Ltd. (AMEX:NEP), Cornerstone Therapeutics, Inc. (NASDAQ:CRTX), and Gulf Resources, Inc. (NASDAQ:GFRE) are three compelling value plays for investors to watch into 2010.

See Also: How to Value Stocks with the PEG Ratio

Strike it Rich with China North East Petroleum

China North East Petroleum Holding Ltd. (NEP), an independent oil company that engages in the production of crude oil in Northern China, has seen substantial growth of 281% growth in 2008 and analysts are projecting significant triple-digit growth in 2010. However, the market continues to value the firm at just 9.42x its current fiscal year’s estimate.

NEP operates 247 producing oil wells located in Northern China, as of December 31, 2008, and has arrangements with the Jilin Refinery of PetroChina Group to sell the crude oil production for use in the Chinese marketplace. The company’s revenues fell during 2008 amid lower oil prices, but many analysts expect a robust recovery during 2010 and beyond.

Currently, analysts expect NEP to earn $0.73 on $63.4 million in revenues in 2009 and $1.26 on $116.8 million in revenues in 2010. While 2009’s earnings are below 2008’s earnings of $0.98 per share, the figure puts the company’s earnings multiple at a cheap 9.42x earnings with potential bottom-line growth of 72.6%. This equates to a PEG ratio of 0.129x.

At the same time, NEP outperforms its industry peer group in several important metrics. The company’s gross margins stand at 71.4% compared to a 62% industry average, while its return on equity is positioned near 28.1% compared to a (7.2%) loss for the industry as a whole. Internally, the company also maintains a healthy balance sheet with very little debt on its books.

Breathe a Little Easier with Cornerstone Therapeutics

Cornerstone Therapeutics, Inc. (CRTX), a specialty pharmaceutical company focused on acquiring and commercializing respiratory products, has seen substantial growth of approximately 112.6% in 2008. While the stock isn’t expected to earn as much in 2008, the stock may be undervalued given its future growth prospects in 2010 and P/E multiple of 11.8x.

Not long ago, Cornerstone found itself in need of a cash infusion and sold a majority stake to an Italian pharmaceutical company. And while revenues improved last quarter, much of the gain came from acquisitions that it made last year. And finally, the company recently received a warning letter from the FDA citing distribution of drugs without approved applications for them.

Despite the turmoil, Cornerstone appears to be available now at a bargain price. Specifically, the company is continuing to make progress on its pipeline products. Its extended-release hydrocodone anti-tussive product filing was submitted earlier this year and was accepted for review by the FDA in July 2009 – and the company expects an approval by early 2011.

In the end, Cornerstone has been generating strong cash flows with an extensive pipeline of internal products, yet trades at just 11.8x its projected earnings. Going forward, some investors are looking towards the company’s anti-tussive products to sustain long-term growth, while it works to turn around its existing operations in 2010.

Smooth Sailing with Gulf Resources

Gulf Resources, Inc. (GFRE), a leading manufacturer of bromine, crude salt and specialty chemical products in China, has seen substantial growth of 61.3% in 2008 and analysts are projecting 24.1% in 2009 despite the economic slowdown. However, the market continues to value the firm at just 10.45x its trailing 12-month earnings.

Recently, the company issued 2,941,182 shares in a private placement at a price of $8.50 per share for an aggregate $25 million in order to acquire additional bromine and crude salt production assets. These acquisitions should help boost growth, while investors can be reasonably assured that the company will not raise additional equity capital in the near future.

GFRE also remains very strong fundamentally with profitability ratios that far exceed both its industry, its sector, and the S&P 500. For example, its gross margins stand at 43.1% compared to 35.3% for its industry, while its return on equity is 40.1% compared to 16% for its industry. Meanwhile, the company has no debt and generated $1.09 per share in cash in 2008.

In the end, this GFRE trades at a compelling price-earnings to growth ratio, while it also maintains an extremely healthy balance sheet. Combined, these factors make it worth a second look for many value investors looking for a small cap addition to their portfolios.

Conclusions

China North East Petroleum Holding Ltd., Cornerstone Therapeutics, Inc., and Gulf Resources, Inc. are three compelling value plays for investors to watch into 2010.

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Top PEG Value Plays for 2010 – NEP, CRTX, GFRE

China North East Petroleum Holding Ltd. (AMEX:NEP), Cornerstone Therapeutics, Inc. (NASDAQ:CRTX), and Gulf Resources, Inc. (NASDAQ:GFRE) are three compelling value plays for investors to watch into 2010.

See Also: How to Value Stocks with the PEG Ratio

Strike it Rich with China North East Petroleum

China North East Petroleum Holding Ltd. (NEP), an independent oil company that engages in the production of crude oil in Northern China, has seen substantial growth of 281% growth in 2008 and analysts are projecting significant triple-digit growth in 2010. However, the market continues to value the firm at just 9.42x its current fiscal year’s estimate.

NEP operates 247 producing oil wells located in Northern China, as of December 31, 2008, and has arrangements with the Jilin Refinery of PetroChina Group to sell the crude oil production for use in the Chinese marketplace. The company’s revenues fell during 2008 amid lower oil prices, but many analysts expect a robust recovery during 2010 and beyond.

Currently, analysts expect NEP to earn $0.73 on $63.4 million in revenues in 2009 and $1.26 on $116.8 million in revenues in 2010. While 2009’s earnings are below 2008’s earnings of $0.98 per share, the figure puts the company’s earnings multiple at a cheap 9.42x earnings with potential bottom-line growth of 72.6%. This equates to a PEG ratio of 0.129x.

At the same time, NEP outperforms its industry peer group in several important metrics. The company’s gross margins stand at 71.4% compared to a 62% industry average, while its return on equity is positioned near 28.1% compared to a (7.2%) loss for the industry as a whole. Internally, the company also maintains a healthy balance sheet with very little debt on its books.

Breathe a Little Easier with Cornerstone Therapeutics

Cornerstone Therapeutics, Inc. (CRTX), a specialty pharmaceutical company focused on acquiring and commercializing respiratory products, has seen substantial growth of approximately 112.6% in 2008. While the stock isn’t expected to earn as much in 2008, the stock may be undervalued given its future growth prospects in 2010 and P/E multiple of 11.8x.

Not long ago, Cornerstone found itself in need of a cash infusion and sold a majority stake to an Italian pharmaceutical company. And while revenues improved last quarter, much of the gain came from acquisitions that it made last year. And finally, the company recently received a warning letter from the FDA citing distribution of drugs without approved applications for them.

Despite the turmoil, Cornerstone appears to be available now at a bargain price. Specifically, the company is continuing to make progress on its pipeline products. Its extended-release hydrocodone anti-tussive product filing was submitted earlier this year and was accepted for review by the FDA in July 2009 – and the company expects an approval by early 2011.

In the end, Cornerstone has been generating strong cash flows with an extensive pipeline of internal products, yet trades at just 11.8x its projected earnings. Going forward, some investors are looking towards the company’s anti-tussive products to sustain long-term growth, while it works to turn around its existing operations in 2010.

Smooth Sailing with Gulf Resources

Gulf Resources, Inc. (GFRE), a leading manufacturer of bromine, crude salt and specialty chemical products in China, has seen substantial growth of 61.3% in 2008 and analysts are projecting 24.1% in 2009 despite the economic slowdown. However, the market continues to value the firm at just 10.45x its trailing 12-month earnings.

Recently, the company issued 2,941,182 shares in a private placement at a price of $8.50 per share for an aggregate $25 million in order to acquire additional bromine and crude salt production assets. These acquisitions should help boost growth, while investors can be reasonably assured that the company will not raise additional equity capital in the near future.

GFRE also remains very strong fundamentally with profitability ratios that far exceed both its industry, its sector, and the S&P 500. For example, its gross margins stand at 43.1% compared to 35.3% for its industry, while its return on equity is 40.1% compared to 16% for its industry. Meanwhile, the company has no debt and generated $1.09 per share in cash in 2008.

In the end, this GFRE trades at a compelling price-earnings to growth ratio, while it also maintains an extremely healthy balance sheet. Combined, these factors make it worth a second look for many value investors looking for a small cap addition to their portfolios.

Conclusions

China North East Petroleum Holding Ltd., Cornerstone Therapeutics, Inc., and Gulf Resources, Inc. are three compelling value plays for investors to watch into 2010.