Youku Tudou (YOKU) Stock Closed Up as China's Stocks Climbed

NEW YORK (TheStreet) -- Youku Tudou  (YOKU) stock closed up by 0.88% to $26.37 on Monday afternoon, after the Chinese government's plan to restart IPOs propelled China's stocks to an 11-week high.

Youku Tudou, commonly referred to as "China's YouTube," is an Internet television company based in Beijing.

The Shanghai Composite Index closed higher by 1.6% to 3,646.88 today, its highest close since August 20, Bloomberg reports.

The country's government announced late Friday that investors will not need to deposit funds when they apply for share subscriptions, according to Bloomberg. 

The new policy indicates increased confidence in the China's markets, and will grant Chinese companies an additional financing source as they attempt to diminish debt. 

"The market interprets this as positive news as IPOs can bring some good companies here," Wang Zheng, CIO at Jingxi Investment Management, told Bloomberg. "The rally will probably continue."

Separately, TheStreet Ratings team rates YOUKU TUDOU INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate YOUKU TUDOU INC (YOKU) 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 good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

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

  • YOKU's very impressive revenue growth greatly exceeded the industry average of 15.1%. Since the same quarter one year prior, revenues leaped by 57.1%. 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.
  • Although YOKU's debt-to-equity ratio of 0.10 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.52, which clearly demonstrates the ability to cover short-term cash needs.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 139.8% when compared to the same quarter one year ago, falling from -$22.99 million to -$55.15 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, YOUKU TUDOU INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: YOKU

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.