American Vanguard Corp. (AVD): Zacks Rank Buy
American Vanguard Corp. (AVD) saw its share price catapult roughly 124% in 2012, as this maker of diversified specialty chemicals is seeing strong demand for soil insecticides. Furthermore, the Zacks Rank #1 (Strong Buy) stock has put together five positive earnings surprises in the past six quarters.
With a series of earnings beats, an above-average projection for long-term earnings growth of 24% and favorable industry trends, AVD appears to fit the bill for aggressive growth investors.
Strong Beat in Q3
On November 1, American Vanguard posted a solid jump in its third-quarter 2012 profit, riding on strong market demand for its products. Earnings of 28 cents per share topped the Zacks Consensus Estimate by nearly 22% and surpassed last year's performance by as much as 75%.
Revenues soared 23% year over year to $90.8 million, comfortably beating the Zacks Consensus Estimate of $83 million. Gross margin rose to 43.7% from 41.4% a year ago, aided by better mix, higher pricing and manufacturing efficiency.
American Vanguard said results in the upcoming reporting periods will be supported by the successful roll out of its herbicide co-marketing program with Monsanto (MON). The company also noted that its crop protection products will aid sales growth and profitability.
American Vanguard is expected to report its fourth quarter results on March 4. The Zacks Consensus Estimate is currently at 35 cents per share.
Rising Earnings Estimates
The Zacks Consensus Estimate for 2012 has moved up roughly 5% in the last 90 days to $1.22 per share, representing year-over-year growth of around 52.5%. For 2013, the Zacks Consensus Estimate rose roughly 7% over the same period to $1.57 per share, indicating an estimated growth of 28.69%.
Valuation Warranted
American Vanguard is currently trading at a forward P/E of 20.15x, on par with the peer group average. The price-to-book of 4.10x is, however, higher than the peer group average of 2.02x. Moreover, the price-to-sales of 2.55x is well above the peer group average of 0.65x. The healthy earnings trajectory should lend support to valuation.
Sound Technicals
American Vanguard has been trading above the 200-day moving average since November 2011. Interestingly, the 50-day moving average continues to read higher than the 200-day moving average, manifesting the bullish trend with the 200-day moving average acting as the support level.
American Vanguard Corp. makes specialty chemical products for agricultural and commercial applications. The company develops and markets an array of chemicals, including insecticides, fungicides and herbicides, for crops, human and animal health protection. American Vanguard, which has a market cap of roughly $888 million, has the largest assortment of corn soil insecticides coupled with the most advanced dispensing equipment.
Other specialty chemical companies with favorable Zacks Ranks are: American Pacific Corp. (APFC), with a Zacks Rank #1 (Strong Buy) and Georgia Gulf Corp. (GGC) with Zacks Rank #2 (Buy).
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