TSC Ratings' Updates: Ctrip.com

The following ratings changes were generated on Thursday, Nov. 20.

We've downgraded Ctrip.com(CTRP Quote), which provides travel services for hotel accommodations, airline tickets, and packaged-tours in the People's Republic of China, from buy to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Revenue rose by 26.6% since the same quarter one year ago, boosting EPS but underperforming the industry average of 28.4%. Ctrip.com has a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. It also has a quick ratio of 2.28, which demonstrates the ability of the company to cover short-term liquidity needs. Current return on equity exceeded its ROE from the same quarter one year prior, a clear sign of strength within the company. On the basis of ROE, Ctrip.com underperformed the hotels, restaurants and leisure industry average but outperformed the S&P 500. Net income increased by 5.1% over the same quarter last year, to $15.4 million, significantly underperforming the average net income growth of the industry but outperforming the S&P 500.

Shares are down 68.6% on the year, underperforming the S&P 500. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, Ctrip.com is still more expensive than most of the other companies in its industry