E-House Shares Dropped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese real estate services company E-House (NYS: EJ) were getting battered today, falling as much as 17% in intraday trading before recovering substantially.

So what: For earnings-season aficionados, it's common knowledge that the release-day performance of a stock has a lot less to do with the absolute performance of the underlying company and much more to do with the performance relative to what Wall Street was expecting.

When it came to third-quarter profits, E-House wasn't able to deliver on either count. The company's top line looked good, with total revenue climbing 23% from last year. However, it reported a non-GAAP net loss per share of $0.01. That was down from a $0.16-per-share profit last year and well short of the $0.09 that analysts were looking for.

Now what: With a miss like that, the wonder here may be why, on a day when the entire market is down, E-House's stock was able to come back as much as it has. E-House is among the many Chinese small caps that have taken a pounding over the past couple of years as investors have become increasingly cynical about the entire sector.

The pessimism has left E-House's stock at an apparently attractive valuation with a 3.5% dividend yield. That doesn't leave a whole lot of room for additional earnings-related worries to knock the stock down further.

Want to keep up to date on E-House?Add it to your watchlist.

At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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