Will SINA Stop Sinking Soon?

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Shares of SINA (NAS: SINA) hit a 52-week low yesterday. Let's take a look at how the company got there to find out whether cloudy skies remain on the horizon.

How it got here
It has not been a good year for Chinese Internet stocks. SINA is one of the worst performers over the past year, but its tough to find any that have escaped the carnage:

SINA Total Return Price Chart

SINA Total Return Price data by YCharts
 


SINA also happens to be the most unprofitable company of the bunch. Its trailing 12-month loss per share of $5.03 is far worse than Youku's (NYS: YOKU) $0.40 loss per share. A number of its peers are now profitable, but have spent the past year watching their valuations fall to earth. Renren (NYS: RENN) has a shorter lifespan on the public markets than Baidu (NAS: BIDU) and Sohu.com (NAS: SOHU) , which have both seen a huge decline in P/E ratios over the past five years. With a higher P/E than either Baidu or Sohu, it's quite possible that Renren's P/E will shrink substantially.

Baidu's beaten this compression effect -- and given shareholders a nice gain -- by massively growing its earnings, but not every Chinese online company will have the same potential. Will SINA be able to emulate Baidu going forward? Let's take a look at some key statistics to find out.

What you need to know
SINA might not be profitable on its income statement, but it's at least managed to eke out some positive free cash flow. That's better than Youku or Renren can muster, but SINA has a long way to go before it reaches the rock-bottom price-to-free-cash-flow ratios of either Baidu or Sohu.

Company

Gross Margin (TTM)

Net Margin (TTM)

Free Cash Flow (TTM)

Price to Free Cash Flow

SINA53.9%(67.7%)$12 million283.3
Youku15.7%(27.1%)($477 million)NM
Renren73.3%23.4%($23 million)NM
Baidu72.6%45.6%$5.84 billion6.4
Sohu70.2%15.6%$133 million11.3
Source: Morningstar. NM = not material due to negative results.

SINA's had multiple occasions for short-term gains, particularly earlier this year, thanks to bullish analysts, the Facebookhalo effect, and a mixed earnings bag with some positive optimism over the company's ability to make money off its Weibo microblogging service. If you've paid attention to the Facebook fiasco, you know that virtually every social media stock has been dragged down by the globe-straddling social network's IPO face-plant.

SINA has its own concerns, particularly over a potential Chinese hard landing that's been both predicted and scoffed at for years. The company's heavy-handed approach to bad Wiebo-ers  -- let's call them trolls -- could also backfire. But Chinese citizens have dealt with oppressive censorship far more frequently than most Western investors ever will. We can't transplant our Internet attitudes to Chinese online stocks and expect the same results.

What's next?
Where does SINA go from here? That will depend on the company's efforts to make microblogging mega-profitable. Wiebo is Sina's meal ticket and, if post-earnings enthusiasm is to be believed, the site may become a cash cow. SINA's earnings have been on a strongly negative trend for the past year, but that could turn around in a hurry:

SINA Revenue TTM Chart

SINA Revenue TTM data by YCharts
 

The Motley Fool's CAPS community has given SINA a three-star rating, with 91% of our CAPS players expecting the stock to stage a comeback.

Interested in tracking this stock as it continues on its path? Add SINA to your Watchlist now for all the news we Fools can find, delivered to your inbox as it happens. The Motley Fool loves to find international gems, and we've discovered one stock so compelling, we've named it our "Top Stock for 2012." Want to find out more? Click here for the information you need -- absolutely free.

At the time this article was published Fool contributorAlex Planesholds no financial position in any company mentioned here. Add him onGoogle+or follow him on Twitter@TMFBigglesfor more news and insights.The Motley Fool owns shares of Baidu and Facebook.Motley Fool newsletter serviceshave recommended buying shares of Baidu, Sohu.com, and SINA. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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