TSC Ratings' Updates: Sina

We've downgraded Sina(SINA Quote), which operates as an online media company and information services provider 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 impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Revenue leaped by an impressive 63.8% since the same quarter one year ago, exceeding the industry average of 30.2% growth and boosting EPS. Although Sina's debt-to-equity ratio of 0.17 is very low, it is currently higher than that of the industry average. The company maintains a quick ratio of 3.29, which clearly demonstrates the ability to cover short-term cash needs. The return on equity has improved slightly when compared with the same quarter one year prior, which can be construed as a modest strength in the organization. On the basis of return on equity, Sina has underperformed the Internet software and services industry average but outperformed the S&P 500. Sina's gross profit margin is rather high at 56.70%, though it has managed to decreased since last year. The 20.8% net profit margin trails the industry average.

Shares are down 45.8% on the year, apparently dragged down by the decline we have seen in the S&P 500. In one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.