Back for more CNIT

09/09/11 EOD: $1.18
-0.05 (4.07%)

It's been a while since I've commented on CNIT. In the last month I've been 10 days in Alaska, have gotten a new job (still within the same company), and have spent more time focusing on large cap stocks. That said, I still have an interest (and a stake...) in CNIT, so let's get back to thinking about this little guy.

Here's a look at the daily chart for the last few months:

The first thing we can see is that, after the initial plummet that happened after the last earnings announcement, there was a fairly substantial bounce (as predicted) with buyers coming in to take advantage of the new lows. That said, CNIT has slowly dwindled back to the same levels in the past few weeks. $1.20 seems like a fairly strong area of resistance, and we do see the curve flattening a little, but really there's no telling how much lower this could actually go. The main worry that I have is the fact that the economy is really in the dump right now, and as we all know when people are afraid and retreat from equities, the first things that get kicked out of the portfolio are the riskiest assets, of which small Chinese caps are a part. Note in particular that volume has been very low over the last 1-2 weeks, reflecting the very small number of buyers for this kind of stock when the general economy is feeling this much pressure.

Let's revisit some of the fundamentals on CNIT:

• P/E ratio: 1.90. That's still extremely low and difficult to justify, even in spite of the very poor recent earnings announcement.
• Income margin: >20%. This company is not just making money, it's showing off a very solid income margin to boot. It's sad that companies like this don't get rewarded more than all those start-ups that promise big but report losses over and over.
• Insider Ownership: >40%. The insiders have a lot riding on the success of this stock.
• EPS growth in past 5 years: 57.9%. Huge growth in the past 5 years, with some slowdown this year. The next earnings report will be huge in determining what happens next for the stock.