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Trade-Ideas: SouFun Holdings (SFUN) Is Today's "Perilous Reversal" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified SouFun Holdings ( SFUN) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified SouFun Holdings as such a stock due to the following factors:

  • SFUN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $57.8 million.
  • SFUN has traded 194,011 shares today.
  • SFUN is down 3% today.
  • SFUN was up 10.9% yesterday.

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More details on SFUN:

SouFun Holdings Limited operates a real estate Internet portal, and a home furnishing and improvement Website in the People's Republic of China. The stock currently has a dividend yield of 4.1%. SFUN has a PE ratio of 20.5. Currently there are 3 analysts that rate SouFun Holdings a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for SouFun Holdings has been 645,000 shares per day over the past 30 days. SouFun has a market cap of $3.9 billion and is part of the technology sector and internet industry. Shares are up 114% year to date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SouFun Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 22.4%. Since the same quarter one year prior, revenues rose by 48.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 67.50% and other important driving factors, this stock has surged by 277.11% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, SOUFUN HLDGS LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.23 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, SFUN has a quick ratio of 0.63, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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