NEW YORK (TheStreet) -- SouFun (SFUN) - Get Report stock is sliding by 4.56% to $6.70 in afternoon trading Friday as many China-based U.S.-traded stocks fell after China markets closed down amid regulatory probes.
Based in Beijing, SouFun operates as a real estate Internet portal in China.
The Shanghai Composite Index closed down 5.48% to 3,436.30 today in its biggest daily decline since Aug. 18, pushing the index 38% lower than its June peak, the Wall Street Journal reports.
Three of China's largest brokerages disclosed regulatory investigations regarding suspected securities violations, the Journal notes.
Additionally, industrial profits declined 4.6% in October, and two separate companies noted that they're having difficulties repaying bonds following at least six defaults this year, according to Bloomberg.
Earlier this month, China announced that it would resume initial public offerings by the end of the year and stocks rebounded from previous lows.
"The sharp decline will raise questions whether the authorities' confidence that we are seeing stability in the Chinese markets may be a tad premature," Bernard Aw, a strategist at IG Asia Pte., told Bloomberg. "The rally since the August collapse was not fundamentally supported. The removal of restrictions for large brokers to sell and the IPO resumptions may not have been announced at an opportune time."
Separately, TheStreet Ratings team rates SOUFUN HLDGS LTD as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate SOUFUN HLDGS LTD (SFUN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and notable return on equity. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 30.4%. 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.
- 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 exceeds that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.06 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, SFUN has managed to keep a strong quick ratio of 1.77, which demonstrates the ability to cover short-term cash needs.
- The share price of SOUFUN HLDGS LTD has not done very well: it is down 20.32% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full analysis from the report here: SFUN
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.