NEW YORK (TheStreet) -- Shares of ChinaNet Online Holdings (CNET) were gaining 12.9% to $2.37 Friday after the advertising agency announced its efforts to attract new small and medium-sized enterprises to Fujian province in China in conjunction with the Provincial Government's redevelopment plan.
ChinaNet said it plans to capitalize on the redevelopment plans by increasing its local presence and using its B2B/B2C online and marketing model to broaden investment channels and give opportunities to franchise brands looking to enter the Fuijian coast.
The Fujian Provincial Government estimates the service economy will reach 1 trillion RMB by 2015. Most of those new service industry brands use a franchise development model, according to ChinaNet.
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TheStreet Ratings team rates CHINANET ONLINE HOLDINGS as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CHINANET ONLINE HOLDINGS (CNET) a SELL. This is driven by several 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 feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CHINANET ONLINE HOLDINGS 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 two years. During the past fiscal year, CHINANET ONLINE HOLDINGS swung to a loss, reporting -$0.01 versus $0.13 in the prior year.
- 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 Media industry. The net income has significantly decreased by 406.7% when compared to the same quarter one year ago, falling from $0.43 million to -$1.33 million.
- 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 Media industry and the overall market, CHINANET ONLINE HOLDINGS's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for CHINANET ONLINE HOLDINGS is rather low; currently it is at 16.37%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -12.84% is significantly below that of the industry average.
- Net operating cash flow has declined marginally to $0.41 million or 0.97% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: CNET Ratings Report