NEW YORK (TheStreet) -- Shares of Baidu Inc. (BIDU - Get Report) are down by 3.63% to $198.77 in mid-morning trading on Monday, as China-based U.S. traded stocks take a hit from the decline in the Chinese stock markets.
Baidu is a Chinese-language Internet provider that services three different types of online participants.
Chinese stocks fell by more than 8% on Monday, as the country's rescue plan to hike up valuations wore down, placing doubts in the government's ability to keep a bigger crash at bay, Reuters reports.
On Monday, China's markets suffered their largest one day drop since 2007, ending about three weeks of smooth trading in the country's volatile markets.
"The lesson from China's last equity bubble is that, once sentiment has soured, policy interventions aimed at shoring up prices have only a short-lived effect," Capital Economics' analysts said in a note, Reuters added.
Additionally, Baidu will report its 2015 second quarter earnings results after the market close today.
Separately, TheStreet Ratings team rates BAIDU INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate BAIDU INC (BIDU) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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, expanding profit margins, increase in stock price during the past year and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 34.4%. 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.
- Despite currently having a low debt-to-equity ratio of 0.47, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.01 is very high and demonstrates very strong liquidity.
- BAIDU INC's earnings per share declined by 6.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BAIDU INC increased its bottom line by earning $6.01 versus $4.96 in the prior year. This year, the market expects an improvement in earnings ($42.47 versus $6.01).
- The gross profit margin for BAIDU INC is rather high; currently it is at 62.72%. Regardless of BIDU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.24% trails the industry average.
- After a year of stock price fluctuations, the net result is that BIDU's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: BIDU Ratings Report