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"We rate RENREN INC -ADR (RENN) a SELL. This is driven by multiple 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 unimpressive growth in net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
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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 54.8% when compared to the same quarter one year ago, falling from -$24.63 million to -$38.12 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, RENREN INC -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for RENREN INC -ADR is currently lower than what is desirable, coming in at 25.50%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -176.27% is significantly below that of the industry average.
- The share price of RENREN INC -ADR has not done very well: it is down 12.95% 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. 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.
- RENREN INC -ADR 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, RENREN INC -ADR continued to lose money by earning -$0.12 versus -$0.19 in the prior year. For the next year, the market is expecting a contraction of 29.2% in earnings (-$0.16 versus -$0.12).
- You can view the full analysis from the report here: RENN Ratings Report