One Factor Bringing E-Commerce China DangDang (DANG) Stock Up Today

NEW YORK (TheStreet) -- Shares of E-Commerce China DangDang (DANG) were gaining 5% to $10.71 on heavy trading volume Wednesday as Chinese stocks rally following Qihoo 360's (QIHU) buyout offer.

Qihoo 360 CEO Hongyi Zhou and other shareholders offer to buy the Chinese Internet company for $77 a share on Wednesday to bring it private. The offer represents a 16.6% premium over Qihoo 360's Tuesday closing price of $66.05 a share.

More than a dozen Chinese companies received buyout offers from executives this year, with Qihoo 360 being the largest of the group, according to Barron's.

E-Commerce China DangDang is a Chinese e-retailer that sells books, audio-visual products, periodicals, cosmetics, home appliances, consumer electronics and other general merchandise.

About 2.8 million shares of E-Commerce China DangDang were traded by 12:17 p.m. Wednesday, above the company's average trading volume of about 1.6 million shares a day.

TheStreet Ratings team rates E-COMMERCE CH DANGDANG -ADR as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate E-COMMERCE CH DANGDANG -ADR (DANG) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and poor profit margins."

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

  • DANG's revenue growth has slightly outpaced the industry average of 18.9%. Since the same quarter one year prior, revenues rose by 28.1%. 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.
  • DANG has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.43 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market on the basis of return on equity, E-COMMERCE CH DANGDANG -ADR underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • This stock has managed to decline in share value by 2.26% over the past twelve months. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The gross profit margin for E-COMMERCE CH DANGDANG -ADR is rather low; currently it is at 16.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.71% trails that of the industry average.
  • You can view the full analysis from the report here: DANG Ratings Report

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