SouFun Holdings (SFUN) Is Today's Perilous Reversal Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified SouFun Holdings ( SFUN) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified SouFun Holdings as such a stock due to the following factors:

  • SFUN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $120.9 million.
  • SFUN has traded 67,780 shares today.
  • SFUN is down 6% today.
  • SFUN was up 8.7% yesterday.

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More details on SFUN:

SouFun Holdings Limited operates a real estate Internet portal, and home furnishing and improvement Websites in the People's Republic of China. The stock currently has a dividend yield of 4.3%. SFUN has a PE ratio of 3. Currently there are 2 analysts that rate SouFun Holdings a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for SouFun Holdings has been 10.8 million shares per day over the past 30 days. SouFun has a market cap of $3.7 billion and is part of the technology sector and internet industry. Shares are up 23.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SouFun Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins 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 ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 1.8%. 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.
  • The gross profit margin for SOUFUN HLDGS LTD is rather high; currently it is at 67.15%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SFUN's net profit margin of 4.94% is significantly lower than the industry average.
  • 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 significantly exceeds that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.05 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 2.05, 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 14.01% 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.

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