Is This Small Cap Agriculture Player Poised to Rise?

Today, I was reading an article at the Financial Times that was about US Department of Agriculture stating that global agriculture stocks are going to rise for the 3rd year in a row (40% over past three years). It got me thinking about small cap stocks in the agriculture industry. Are there any that might gain in 2010?

Put this small cap agriculture stock on your watch list.

The company that caught my eye initially was China Green Agriculture (NYSE: CGA), which is in the agriculture chemicals industry. As it turns out, this small cap stock has been mentioned at a lot of publication sources.

With high insider ownership, sales growth, EPS growth and net magin, China Green Agriculture could be a good play for a couple dollars per share trade.

CGA is just inside the small cap range with a market cap of about $283 million.

Here are some quick points:

• It’s trading at $11.45, which is well below its 52-week high of $18.70.
• Expectations could grow with the increased publicity its receiving.
• Average daily volume is 448,000 shares & P/E ratio is 13.06 & EPS is $0.86
• 1 year estimated target: $16.75
• Stock just took a healthy dive, and could be ready to bounce back—it has already to a point.
• Trader sediment seems highly bullish.

Three Month Stock Chart

About China Green Agriculture

This description is from Yahoo! Finance:

China Green Agriculture, Inc., through its subsidiaries, engages in the research, development, manufacture, and distribution of humic acid based compound fertilizers in China.

Company description direct from CGA’s investor relations:

China Green Agriculture (CGA: NYSE) is primarily engaged in the manufacturing and distribution of humic acid based green fertilizers throughout China. We currently offer over 100 different varieties of fertilizer products targeted for specific growth needs, climate conditions and crop types. R&D activities are conducted in house and manufacturing takes place in our highly automated and computerized production facility. Conveniently located in the central China’s Shaanxi province, China green agriculture has an efficient and centralized nationwide distribution network.

If you want a quick fact sheet about China Green Agriculture, here’s a link to a PDF they provide.

My Thoughts on China Green Agriculture

I’ve put this on my watch list. A couple things that concern me are the overly bearish response to “bad industry news” and the possibility of a pullback in the stock. There’s so much expectation to the upside here that it could be like toppling a house of cards.

On the 10th (pointed this out on the chart) the Chinese agricultural segment was hit fairly hard as whole. But, earnings and other positive events are helping to bring it back.

China Green Agriculture already came down a bit and spiked upward again. Of several stocks in the sector, CGA is one of them that’s showing a positive change over the week.

Overall, I’m watching this stock for a possible trade. As I’ve pointed out on Small Cap Investing before, I’m not traditionally a “long” investor. For me, this stock is about trading a possible swing.

Have any comments about China Green Agriculture or agriculture small cap stocks? I’d love to hear them.