The Capilano Honey Ltd (ASX: CZZ) share price has been on a steady decline for the last six months, which has left me asking will it get its buzz back?
Capilano Honey is one of the largest sellers of honey in Australia. Here is why the share price could recover from its $14.61 lows:
Fast growing export sales
Capilano has probably grown as much as it can in Australia so it must now look to overseas to expand its sales.
The honeypot of the huge Chinese market is appealing to Capilano and management are trying to ramp up sales there.
Over the six months to 31 December 2016 it increased sales to China by 87% over the prior corresponding period. This portion of sales now makes up 18% of the total export sales.
If Capilano can keep increasing sales to China at a high double-digits rate, then this could generate significant profits in the future.
Balance sheet
The net assets backing per share increased in the December 2016 half year report from $4.56 to $6.51 according to Capilano.
Part of this increase was due to the company paying down debt and creditors, which puts the company in a stronger position going forwards.
However, Capilano has built up a substantial level of honey inventory. Over the next period or two this could be a positive as it generates sales and can buy less honey to return to normal stock levels. But, if Capilano needs cash quickly and has to discount the honey to shift it, then it's a negative.
New products
Capilano regularly releases new products to the market which could boost sales and profit in the future. One of its latest ideas is called 'Beeotic' which seeks to benefit from the supposed medicinal properties of honey. Any product that can boost sales and profit is worth exploring for Capilano.
Foolish takeaway
Capilano's share price is now down to $14.61, which means it's trading at 15x FY16's earnings with a grossed-up dividend yield of 3.91%.
I think Capilano is trading at quite attractive value but it may keep falling so it could be worth waiting a little longer before buying. For a stock you could consider buying today you should check out this growth stock expanding in China that has a huge dividend yield.
