E-House Shares Dropped: What You Need to Know

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.

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