Invest in China Green Agriculture and China Automotive Systems

If you are looking for companies that are growing their businesses, it helps if the economy they are in is actually growing too. The most evident place this situation exists today is in China.

I did a screen to screen for growth. My criteria were:

1. Projected EPS growth over the next five years of greater than 25%.
2. Revenue growth last quarter of greater than 15%.
3. Price to cash flow (TTM) of less than 15.

I got a list of 5 stocks back. Two of these stocks were in a region of the world which has been consistently growing – China. This fact provides a little added security to your investment. If the overall region’s economy is growing, a top performing stock is likely to be able to keep growing.

The names of these two stocks are China Green Agriculture, Inc. (CGA) and China Automotive Systems, Inc. (CAAS). The actual statistics in these categories are:

 

Next I looked at what they did. The CGA profile from Yahoo Finance says:

China Green Agriculture, Inc. engages in the research, development, manufacture, and distribution of humic acid organic liquid compound fertilizers in the provinces in China. Humic acid is a natural, organic ingredient for a balanced, fertile soil, and the primary constituents of organic matter. The company produces approximately 119 fertilizer products. It markets its fertilizer products to private wholesalers and retailers of agricultural farm products. The company was founded in 2000 and is based in Xian, the People’s Republic of China.

This all sounds like music to my ears. I know agriculture stocks in the US and Canada have been doing well. I know grain commodities futures are one of the things people are buying as a hedge against inflation. I know grain commodities have been strong lately. I know the world population is growing. I know all of those people have to eat. This stock just makes sense.

The CAAS profile from Yahoo Finance says:
 

China Automotive Systems, Inc., through its interests in Sino-foreign joint ventures, engages in the manufacture and sale of automotive systems and components for the automobile industry in the People’s Republic of China. The company offers automotive parts, power steering gears, automotive steering gears, steering pumps, sensor modular, and electric power steering. It also offers integral power steering gear and pinion power steering gear for light and heavy-duty vehicles and cars. The company was founded in 2003 and is headquartered in Jing Zhou City, the People’s Republic of China.

This again sounds good to me. I know the Chinese car market has recently surpassed the US car market as the leader in new car sales. The population of China is much bigger than that of the US. (1.3B compared to 0.3B people). The Chinese economy has still been growing even through this worldwide recession. It makes sense that the auto industry (and by extension the auto parts industry) would be growing in this still quickly growing economy. I am cheered by this news.

Let’s examine a few more details about these stocks just to be sure they are in good shape. The following table was compiled with data from Yahoo