To OTC Journal Members: 

Three of the stocks listed as followed by the OTC Journal have reported Q1 earnings, and so far it's a mixed bag of corporate performance and stock performance. Let's start with them as they came up:
 

Universal Travel (NYSE: UTA): The Market Loves the 68.5% Top Line Growth

Universal Travel (UTA), one of the super hot China stocks from the second half of '09, is really charging up the chart since announcing Q1 earnings resutls. I didn't have the chance to listen to the conference call on this one, but I've looked at the numbers.

In short, after looking at the numbers, the stock is trading better than I anticipated. Here's the headline numbers- the top line was $26.1 million, up a whopping 68.5% over Q1 '09. Awesome. The bottom line- GAAP net income was $4.1 million vs $3.2 million, or .23 in EPS. Of the 64.5% top line growth, 34.5% came from organic growth- the rest from acquistions.

Here's the problem- The company earned $.23 per share in Q1 of '09, and $.23 per share in Q1 of '10. No EPS growth, which can be attributed to a combination of more shares issued and lower gross margins. However, consider this - the company delivered $.23 in EPS for the quarter- that's a few cents shy of $1 in annual EPS. What the heck was a company, earning nearly $1 per share and delivering strong top line growth, doing trading at just under $8 on the NYSE? This valuation seems absurd. Good question.

The market responded to the question by bidding the stock up from $7.50 to $9.50 in two trading days. Funny- the market's initial knee jerk reaction was down. Then, the stock turned abruptly back up as investors digested the news.

I'm going to keep this one on my list of followings. They have to stop issuing shares, stablize the margins, and deliver EPS growth for this to become the $20 stock I always felt it could be. You are looking at the Financial Statement effect of growing pains. However, from this week's numbers, there is little doubt UTA is a highly profitable and major player in the rapidly growing travel space in China.
 

China Education Alliance (NYSE: CEU): An Educated Stock To Own

I looked at the CEU numbers today, listened to the conference call, then doubled down on my position. This stock is very cheap, but it might take another quarter or two for investors to get just how cheap it is. This company's corporate performance has the opposite problem of UTA- they delivered great margins and strong Earnings Per Share, but top line growth was limited to 5%, which is about a stand still for a China based company.

Total revenues were $8.62 million for the quarter- up from $8.2 in '09- only 5%. Gross profits improved 12.3%, which means the bottom line is growing faster than the top line- that's better margin business. The stock market loves improving margins.

Net income was $.12 in EPS- about $.48 in annual EPS, which makes the stock super cheap at $4.75. Let me rephrase that statement. The stock is not super cheap against a "no-growth" background. However, later in the conference call, management forecast 30% growth for the entire year, which means their growth has to be far greater than 30% for the remaining quarters. Management was quizzed about this extensively, but remained firm in the 30% annual growth rate forecast.

Here's a great kicker- the company has $68.5 million in cash and no debt. It equates to about $2.12 per share in unencumbered cash. Nice.... There's probably no two week trade here, but for those who can see a few months down the road, there could be a double in this stock from the current $4.75 level.

I'm willing to buy into the 30% growth forecast beause the company has a history of growing in spurts. When the market starts to believe in 30% growth, this stock will sprout wings.
 

China Recycling Energy (NASDAQ: CREG) Headlines Great- Market Move TBD

CREG posted their quarterly numbers on the SEC's EDGAR System day after the close, so the market hasn't cast it's vote yet. However, the headline numbers are going to be very strong. The top line growth number might be 134%, or it might be 125% depending on how they count it up.

It appears they have recategorized how they book their revenues. It lookls like they may have changed Rental Income to Interest Income. It all comes down to $5.4 million in gross profits for Q1 '10, up from 2.4 million in '09- 125% growth. The bottom line $2.1 million net, or $.06 in EPS, up from $.03 last year- 100% improvement.

The market just might love this one as predicted, or it might sell off - hard to say. $.06 equates to annual EPS of $.24. With a $4 close today, we're at 16.6x underestimated '10 for a PE, so there's still lots of upside. On the slightly negative side, the stock has rebounded from a low of $2.78 a few days ago, so there might be a bit of "Buy on Mystery, Sell on History" built into this one. If it does pull back, I suspect it will be short lived.

Tomorrow, there is a conference call at the open to discuss the numbers. Tune in- it will be interesting. Long term- a great growth stock to own.
 

Biostar (NASDAQ: BSPM) Still To Come

Friday, after the close, BSPM will announce Q1 numbers, and host a conference call Monday morning as the market opens. This is one I believed has a real shot of trading up on earnings. Numbers out after the close on Friday- interesting timing. Conference call preopen on Monday. 
 

Xinhua Sports (NASDAQ: XSEL): Just a Mess

XSEL treated us pretty well for a brief time last fall, but is now in absolute ruins. The company was forced to take a write down of $300 million in FY '09, and reported a Q4 loss. They were also hurt by the Chinese government limiting their commercial time per hour on the public airwaves- this is the result of a new ruling. Take your loss, and let's wait for more favorable winds to blow the way of the fledgling ESPN of China.

Disclosure: Long CEU, CREG, BSPM, XSEL

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