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TheStreet Open House

LightInTheBox (LITB) Dives on CFO Departure, Chinese Web Stocks Tumble

Stocks in this article: DANGLITBYOKUSINABIDU

NEW YORK (TheStreet) -- On a day when Chinese internet stocks are already taking off significant share value, LightInTheBox (LITB) has tumbled on news its chief financial officer is leaving the company. By early afternoon, shares had unloaded 9.4% to $8.93.

The online retailer said CFO Richard Xue would leave the company "due to personal reasons", effective Feb. 17. Financial controller and vice president of finance, Jennifer Hu, will assume Xue's responsibilities until the board finds a permanent replacement.

"I'd like to thank Richard for his significant contributions to the company, including a very successful IPO in 2013. We wish him the best in his future endeavors," said CEO Alan Guo in a statement.

Other China-based web stocks were tumbling on Monday, aftermath of a SEC ruling last week that Chinese units of accounting firms KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst and Young were barred from auditing U.S.-listed companies for six months. The ruling was in connection to the firms deliberately failing to give regulators audit papers for Chinese companies investigated for accounting fraud. 

Internet TV provider Youku Tudou (YOKU) dumped 2% to $29.36, social network Sina Corp (SINA) was 2.3% lower to $68.40, search engine Baidu (BIDU) took off 2.3% to $157.73, and auction site E-Commerce China Dangdang (DANG) plummeted 6% to $8.72.

TheStreet Ratings team rates YOUKU TUDOU INC as a Hold with a ratings score of C-. The team has this to say about their recommendation:

"We rate YOUKU TUDOU INC (YOKU) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • YOKU's very impressive revenue growth greatly exceeded the industry average of 9.2%. Since the same quarter one year prior, revenues leaped by 73.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • YOKU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.21, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for YOUKU TUDOU INC is rather high; currently it is at 51.27%. Regardless of YOKU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YOKU's net profit margin of -25.49% significantly underperformed when compared to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 140.4% when compared to the same quarter one year ago, falling from -$14.93 million to -$35.88 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, YOUKU TUDOU INC's return on equity significantly trails that of both the industry average and the S&P 500.

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