NEW YORK ( TheStreet) -- ChinaNet Online Holdings (Nasdaq: CNET) has been downgraded by TheStreet Ratings from hold to sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 498.1% when compared to the same quarter one year prior, rising from $0.79 million to $4.71 million.
  • CHINANET ONLINE HOLDINGS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CHINANET ONLINE HOLDINGS turned its bottom line around by earning $0.79 versus -$0.21 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.79).
  • CNET's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.54, which clearly demonstrates the ability to cover short-term cash needs.
  • CNET, with its decline in revenue, underperformed when compared the industry average of 11.7%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • CNET has underperformed the S&P 500 Index, declining 24.79% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

ChinaNet Online Holdings, Inc., through its subsidiaries, operates media development and advertising platforms for the small and medium enterprise market in the People's Republic of China. The company has a P/E ratio of 3.6, equal to the average media industry P/E ratio and below the S&P 500 P/E ratio of 17.7. ChinaNet Online has a market cap of $47.4 million and is part of the services sector and media industry. Shares are down 42.9% year to date as of the close of trading on Friday.

You can view the full ChinaNet Online Ratings Report or get investment ideas from our investment research center.
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