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Infrastructure and development boom in China great for steel company's bottom line.

If a stock can officially be on fire, it is China Precision Steel (NASDAQ: CPSL, Bullboard). Shares have moved from under $4.00 to over $7.50 in two days.

The company deserves it and may have further to run; its 52-week high is $12.65.

For the first quarter, revenue at the company grew 61% to $18.7 million. Operating income was up 137% to $4.4 million. Sales outside China were up almost ten times to 19% of total revenue.

The building boom in China is likely to help CPSL for several years. The risks in the company are the rising costs of iron, which could pinch margins, and any sharp drop in China's GDP. So far, so good.

CPSL's large production facility only operates at 50% capacity now. That is something of a drag on expenses, but it means as the company grows, it should not have large capex.

Owning a company like this with Chinese GDP going up 10% per annum is a license to steal.

ABOUT THE AUTHOR
From the news desk of 24/7 Wall St.

This report was prepared by 24/7 Wall St., LLC exclusively for Stockhouse. 

 
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Comments
I don't agree with that actually, I think it depends on what your idea of the long term is though. Considering they are operating at 50% capacity, as the company grows and has to fulfill more and larger orders, it will not need to incur expansion costs. With the Chinese economy rolling along (and with environmental regulations unlikely) I think they have a good trend building.
From its past history, it doesn't appear it can stand a large period of continue to maintain a high stock price. As much as it is rallying at the moment, I would not say it would last in the long term.
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