Why Trulia (TRLA) Stock Is Sinking Today

NEW YORK (TheStreet) -- Shares of Trulia Inc  (TRLA) are slipping, down 5.01% to $55.35 after the real estate search engine company received a request last Wednesday for additional information from the FTC in regards to its proposed merger with Zillow (Z) , and ahead of tomorrow's presentation by short-seller Andrew Left at the Value Investing Congress.

Citron Research's Left said the two companies have a "losing business model" and has taken a negative stance on the all-stock deal that was valued at about $3.5 billion when it was announced July 28.

Shares of Zillow (Z) are down 4.92% to $130.45 this afternoon.

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Separately, TheStreet Ratings team rates TRULIA INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TRULIA INC (TRLA) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share."

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

  • 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 640.9% when compared to the same quarter one year ago, falling from -$2.41 million to -$17.86 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, TRULIA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.82 million or 117.73% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • TRULIA INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TRULIA INC reported poor results of -$0.50 versus -$0.12 in the prior year. This year, the market expects an improvement in earnings (-$0.27 versus -$0.50).
  • TRLA's debt-to-equity ratio of 0.62 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 6.23 is very high and demonstrates very strong liquidity.
  • You can view the full analysis from the report here: TRLA Ratings Report

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