Coming off an all time low of $0.70 almost two years after its all time high of $5.70, could it be time to buy the penny stock of Guanwei Recycling Corp. (GPRC)? Unequivocally Yes! GPRC stock price is just a dime above its all time low and interest in the penny stock seems to be deteriorating making it a perfect time to strike. Guanwei Recycling, China’s leading clean tech manufacturer of recycled low density polyethylene, is not only growing better than any of its competitors, but has been reporting positive EPS for over a year already.
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GPRC Stock Chart
Market Cap: 16.63M
Trailing P/E (ttm): 1.32
Price/Sales (ttm): 0.26
Price/Book (mrq): 0.47
52-Week High
(Jul 12, 2011): 2.10
52-Week Low
(Mar 29, 2012): 0.70
Shares Outstanding: 20.82M
Float: 8.82M
% Held by Insiders: 57.65%
When Guanwei Recycling Corp. filed their most recent 10-Q, investors dumped the $1.72 shares. Although revenues for Q1 increased 14.35%, decreases in gross profit and gross profit margin led to an approximately 24% year over year decline in net income. Chen Min, CEO of the Company, stated that sales of manufactured recycled LDPE in Q1 increased less than 1.0%, which he explained was attributed to an atypical increase in purchases by customers during Q4 of 2011 since the Chinese Spring Festival was celebrated earlier than usual this year.
GPRC did lose $2.6 million in operating cash flow during Q1 mainly due to inventory stockpiling and an increased accounts receivable since Guanwei began offering better payment terms to its largest customers. Regardless of the dip in Q1 sales, net income was $2.07 million or $0.10 per share, compared with $2.72 million or $0.14 per share a year earlier. However, the recent announcement by the central bank of China of a quarter-percentage-point cut in its benchmark lending and deposit rates may prove helpful to China’s economy and, in particular, several of Guanwei’s customers.
All that aside, Guanwei is now allowed to import up to 115,000 tons of plastic waste, nearly double their prior quota of 59,000 tons. Guanwei was able to import up to 99,000 tons in 2011 and is expected to import the full 115,000 tons in 2012.
About GPRC Stock
Guanwei Recycling Corp. is China’s largest manufacturer of recycled low density polyethylene (LDPE). Adhering to the highest “green” standards, it has generated rapid growth producing LDPE from plastic waste procured mostly in Europe for sales to more than 300 customers in more than ten different industries in China. Guanwei Recycling Corp. is one of the few plastic recyclers in China that has been issued a Compliance Certificate by Umweltagentur Erftstadt, which issues certificates of approval for certain plastics manufacturers which meet strict environmental standards in Germany. This enables the Company to procure high quality plastic waste directly from Germany and other European countries, including Spain and Holland, with no middlemen, and permits economic production of the highest grades of LDPE.
To view the SEC filings for GPRC, click here.
Bottom Line: GPRC might not be the most exciting of penny stocks, but with its direct line to Germany and the EU, it’s a steal at the low multiples it currently trades at. GPRC is one of the rare Chinese companies certified by PRC representatives and Germany’s TUV Rheinland which allows them to import better waste products from Europe directly.
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