Absurdly Low Valuation Makes Farmmi One of China’s Best Deals

Did you ever imagine that you’d invest in a Chinese agricultural-products company? Maybe not, but Farmmi (NASDAQ:FAMI) is worthy of your investment capital, as there’s a hidden gem to be found in FAMI stock.

Image of a tractor cultivating field

Source: Shutterstock

Now, I know what some of you are thinking. Chinese stocks are toxic, right?

After all, no one wants to invest in the next Evergrande (OTCMKTS:EGRNF). Mad Money‘s Jim Cramer even went so far as to say that “you should steer clear of” Chinese initial public offerings (IPOs) “at all cost.”

With warnings like that, its no surprise that some folks might feel skittish about investing in FAMI stock.

Yet, I encourage you to be motivated instead of fearful. Unlike Evergrade, Farmmi is poised for rapid growth and deserves consideration rather than condemnation.

A Closer Look at FAMI Stock

It’s difficult to know for certain, but FAMI stock may have been the target of a massive Reddit-fueled short squeeze.

The stock started off 2021 at $1.14, but suddenly catapulted to $2.47 in February. There wasn’t any company-specific news catalyst to justify such a quick doubling of the share price. Besides, FAMI stock had the hallmarks of a Reddit target: the low share price, the relatively low trading volume (prior to the rally) and the fact that it’s not a blue-chip stock.

Whatever prompted the rally, it evidently didn’t last long. Painfully, the Farmmi share price crashed below $1 in April, and even dropped below 25 cents in September. As of early November, FAMI stock was trading at around 32 cents.

If you like to buy stocks during peak pessimism, this should be a prime opportunity.

Moreover, Farmmi’s trailing-12-month price-to-earnings ratio is ludicrously low at 2.54.

So, it’s not as if Farmmi doesn’t have earnings. Wall Street just doesn’t seem to like the company and the stock at the moment — but that could change, as the investing community is fickle.

A Fancy Fungus Purveyor

You might say that Farmmi is China’s go-to provider of what I call “fancy fungi” – i.e., Shiitake mushrooms and similar edibles.

Now, while Evergrande is losing clients as well as people’s trust, Farmmi has been busy racking up orders like there’s no tomorrow. I’ve already listed eight major purchase orders in a previous article. These orders came in from multiple regions of the world, including the United States, Canada and Lebanon.

Furthermore, Farmmi, via its Zhejiang Farmmi Biotechnology subsidiary, just won a new multi-product order for dried black fungus and whole dried mushrooms. The release states that the customer will then, reportedly, export the products to Vancouver, Canada. Farmmi Chairwoman and CEO Yefang Zhang marked the occasion with optimism about her company’s international progress.

“We are pleased with the continued momentum we are seeing in our target international growth markets, including Canada, the U.S. and Europe,” Zhang said.

Diversifying the Business

Don’t get the impression that Farmmi’s business model is limited to fungus-product sales alone, though.

Indeed, you might be pleasantly surprised to learn that Farmmi is diversifying into healthcare. In this vein, Farmmi has agreed to purchase around 16% of Shanghai Jiaoda Onlly. That company is one of the China’s largest listed elderly-care and rehabilitation institutions. Currently, Jiaoda Onlly operates 14 nursing and rehabilitation institutions, with capacity of nearly 4,000 beds.

Impressively, Jiaoda Onlly generated close to 333 million yuan (approximately $52.1 million in U.S. currency) in fiscal-year 2020. Equally impressive is that Jiaoda Onlly’s health-food business has 31 health-food approval numbers and 16 invention patents. These cover a range of products including: dietary supplements, traditional tonics, products for heart protection and hypoglycemia conditions and more.

The Bottom Line on FAMI Stock

Hopefully, I’ve proven today that Farmmi is far from the next Evergrande.

If anything, it should be the next breakout star on Wall Street.

Farmmi’s valuation is ultra-low, and the company is expanding into a number of high-potential markets.

So, there’s no need to let the fear-mongering deter you. FAMI stock is cheap now, and deserves to get a major re-rating very soon.

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On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


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