China Precision Steel: Ready for a Major Run
China Precision Steel (CPSL) is both a short-term and long-term must own, a company that has clearly been overlooked by analysts. Several years ago, the stock had a major sell off, dropping from the $14 level after it made the strategic decision in 2006 to switch its product mix from lower-quality steel products with lower margins to high-precision products with much higher margins.
The company has completely turned around after incurring the associated capital expenditures, including R&D, which caused the stock to drift lower over several years. But now the company is spending only 1% of revenue on R&D, has returned to handsome profitability and is on track to reward investors with rapid and sustained earnings growth. None of these developments have been factored into the stock price.
The stock is extremely undervalued as I will discuss further in this article. I expect the stock to easily break through the $2 mark prior to its upcoming earnings release, and to make a new 52-week high above $2.67 shortly thereafter and reach the $4-$5 range by 2012.
China Precision Steel is a steel processing company engaged in the manufacturing and selling of precision cold-rolled steel products and in the provision of heat treatment and cutting of medium and high carbon hot-rolled steel strips. Its specialty precision products are used in the manufacture of automobile parts and components, steel roofing, plane friction discs, appliances, food packaging materials, saw blades, textile needles and microelectronics.
There are several factors that compel me to buy
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