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Sohu.com Inc. (SOHU), is a Chinese online media, search, gaming, community and mobile service group. Its businesses operate in several segments: Online advertising, online games, wireless business, etc. The online advertising and online games are its core businesses. We like Sohu for several reasons.
On the high end, EPS for 2012 is projected to come in at $4.64 and surged to $7.26 in 2013. Cash flow per share has surged from $4.32 in 2009 to $7.55 in 2011. It sports a strong quarterly revenue growth rate of 42% and a high beta of 2.04, which makes it a good candidate for covered writes.
Reasons to be bullish on Sohu.Com Inc :
Net income has increased from $148 million in 2009 to $163 million in 2011.
It has a positive levered free cash flow of $93.06 million.
EBITDA has increased from $228 million in 2009 to $373 million in 2011.
It has a good 5 year ROE average of 24.93%
It has a five year sales growth rate of 44.79%
Sales have increased by 65% from $515 million in 2009 to $852 million in 2011.
Annual EPS before NRI has skyrocketed from 90 cents in 2007 to $4.62 in 2011.
It has a good free cash flow yield of 9.62%
Projected EPS growth rate for the next 3-5 years is 18.57%
Insiders have a decent-sized stake in the company; percentage held by insiders is 21.05%
Gross profits have increased from $391 million in 2009 to $615 million in 2011.
Cash flow from operating activities increased from $235 million in 2009 to $370 million in 2011
A very good Debt/Total Cap 5 Year Average of 0.22
A good quick and current ratio of 2.93 and 2.93 respectively
An excellent cash ratio of 2.67
$100K invested for 10 years would have grown to $4.16 million.
Click on charts below to enlarge:
Many key ratios will be covered in this article and investors would do well to get handle on some of the more important ones which are dealt with below.
Long-term debt-to-equity ratio is the total long term debt divided by the total equity. The amount of long-term debt a company carries on its balance sheet is very important, for it indicates the amount of money a company owes that it doesn't expect to pay off in the next year. A balance sheet that illustrates that long-term debt has been decreasing for a few years is a sign that the company is doing well. When debt levels fall, and cash levels increase, the balance sheet is said to be improving and vice versa. If a company has too much debt on its books, it could end up being overwhelmed with interest payments and risk having too little working capital, which could in the worst case scenario lead to bankruptcy.
Operating cash flow is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt; the cash flow is what pays the bills.
The payout ratio tells us what portion of the profit is being returned to investors. A payout ratio over 100% indicates that the company is paying out more money to shareholders than it is making; this situation cannot last forever. In general, if the company has a high operating cash flow and access to capital markets, it can keep this going on for a while. As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for some time. If the payout ratio continues to increase, the situation warrants close monitoring as this cannot last forever; if your tolerance for risk is low, look for similar companies with the same or higher yields, but with lower payout ratios. Individuals searching for other ideas might find this article to be of interest.
Current Ratio is obtained by dividing the current assets by current liabilities. This ratio allows you to see if the company can pay its current debts without potentially jeopardizing its future earnings. Ideally the company should have a ratio of 1 or higher.
Price to free cash flow is obtained by dividing the share price by free cash flow per share. Higher ratios are associated with more expensive companies and vice versa; lower ratios are generally more attractive. If a company generated $400 million in cash flow and then spent $100 million on capital expenditure, then its free flow is $300 million. If the share price is $100 and the free cash flow per share is $5, then the company trades at 20 times free cash flow. This ratio is also useful because it can be used as a comparison to the average within the industry. This gives you an idea of how the company you are interested in holds up to the other companies within the industry.
Interest coverage is usually calculated by dividing the earnings before interest and taxes for a period of 1 year by the interest expenses for the same time period. This ratio informs you of a company's ability to make its interest payments on its outstanding debt. Lower interest coverage ratios indicate that there is a larger debt burden on the company and vice versa. For example, if a company has an interest ratio of 11.8, this means that it covers interest expenses 11.8 times with operating profits.
Price to tangible book is obtained by dividing share price by tangible book value per share. The ratio gives investors some idea of whether they are paying too much for what would be left over if the company were to declare bankruptcy immediately. In general, stocks that trade at higher price to tangible book value could leave investors facing a great percentage per share loss than those that trade at lower ratios. The price to tangible book value is theoretically the lowest possible price the stock would trade to. Additional key metrics are addressed in this article: 5 Covered Writes: 2 Excellent, 2 Good And 1 Middling
Company: Sohu.Com Inc
Levered Free Cash Flow = 93.06 million
Basic Key ratios
Percentage Held by Insiders = 21.05
Market Cap ($mil) = 2052
Net Income ($mil) 12/2011 = 163
Net Income ($mil) 12/2010 = 149
Net Income ($mil) 12/2009 = 148
12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 9.5
Quarterly Net Income this Quarterly/ same Quarter year ago = -38.93
EBITDA ($mil) 12/2011 = 373
EBITDA ($mil) 12/2010 = 261
EBITDA ($mil) 12/2009 = 228
Net Income Reported Quarterly ($mil) = 27
Annual Net Income this Yr/ Net Income last Yr = 9.5
Cash Flow ($/share) 12/2011 = 7.55
Cash Flow ($/share) 12/2010 = 4.61
Cash Flow ($/share) 12/2009 = 4.32
Sales ($mil) 12/2011 = 852
Sales ($mil) 12/2010 = 613
Sales ($mil) 12/2009 = 515
- Annual EPS before NRI 12/2007 = 0.9
Annual EPS before NRI 12/2008 = 3.96
Annual EPS before NRI 12/2009 = 3.57
Annual EPS before NRI 12/2010 = 3.62
Annual EPS before NRI 12/2011 = 4.62
Percentage Change Price 52 Weeks Relative to S&P 500 = -36.91
Next 3-5 Year Estimate EPS Growth rate = 18.57
EPS Growth Quarterly(1)/Q(-3) = -119.63
ROE 5 Year Average 06/2011 = 24.93
Return on Investment 06/2011 = 16.42
Debt/Total Cap 5 Year Average 06/2011 = 0.22
Current Ratio 06/2011 = 2.93
Current Ratio 5 Year Average = 3.19
Quick Ratio = 2.93
Cash Ratio = 2.67
Interest Coverage Quarterly = N/A
Book Value Quarterly = 32.02
Price/ Book = 1.68
Price/ Cash Flow = 7.13
Price/ Sales = 2.41
EV/EBITDA 12 Mo = 3.28
For investors looking for other ideas some data has been provided on four additional companies to get you started. Related companies data obtained from barchart.com.
Company : Akamai Tech (AKAM)
Levered Free Cash Flow = 259.33M
Net Income ($mil) 12/2011 = 201
Net Income ($mil) 12/2010 = 171
Net Income ($mil) 12/2009 = 146
EBITDA ($mil) 12/2011 = 475
EBITDA ($mil) 12/2010 = 408
EBITDA ($mil) 12/2009 = 363
Cash Flow ($/share) 12/2011 = 2.16
Cash Flow ($/share) 12/2010 = 1.85
Cash Flow ($/share) 12/2009 = 2.2
Sales ($mil) 12/2011 = 1159
Sales ($mil) 12/2010 = 1024
Sales ($mil) 12/2009 = 860
Annual EPS before NRI 12/2007 = 1.07
Annual EPS before NRI 12/2008 = 1.34
Annual EPS before NRI 12/2009 = 1.35
Annual EPS before NRI 12/2010 = 1.01
Annual EPS before NRI 12/2011 = 1.17
Company : Baidu Inc (BIDU)
Free cash flow= $565 million
Net Income ($mil) 12/2011 = 1026
Net Income ($mil) 12/2010 = 522
Net Income ($mil) 12/2009 = 218
EBITDA ($mil) 12/2010 = 668
EBITDA ($mil) 12/2009 = 293
Cash Flow ($/share) 12/2010 = 2.35
- Cash Flow ($/share) 12/2009 = 1.01
Sales ($mil) 12/2011 = 2304
Sales ($mil) 12/2010 = 1202
Sales ($mil) 12/2009 = 652
Annual EPS before NRI 12/2007 = 0.25
Annual EPS before NRI 12/2008 = 0.44
Annual EPS before NRI 12/2009 = 0.63
Annual EPS before NRI 12/2010 = 1.53
Annual EPS before NRI 12/2011 = 3.02
Company : Sina Corp (SINA)
Net Income ($mil) 12/2011 = -302
Net Income ($mil) 12/2010 = -19
Net Income ($mil) 12/2009 = 412
EBITDA ($mil) 12/2010 = 6
EBITDA ($mil) 12/2009 = 440
Cash Flow ($/share) 12/2011 = 0.69
Cash Flow ($/share) 12/2010 = 1.92
Cash Flow ($/share) 12/2009 = 0.93
Sales ($mil) 12/2011 = 483
Sales ($mil) 12/2010 = 403
Sales ($mil) 12/2009 = 359
- Annual EPS before NRI 12/2007 = 1
Annual EPS before NRI 12/2008 = 1.46
Annual EPS before NRI 12/2009 = 0.61
Annual EPS before NRI 12/2010 = 1.52
Annual EPS before NRI 12/2011 = 0.69
Company : Rackspace Hostg (RAX)
Levered Free Cash Flow = 49.04M
Net Income ($mil) 12/2011 = 76
Net Income ($mil) 12/2010 = 46
Net Income ($mil) 12/2009 = 30
EBITDA ($mil) 12/2011 = 318
EBITDA ($mil) 12/2010 = 235
EBITDA ($mil) 12/2009 = 181
Cash Flow ($/share) 12/2011 = 2.07
Cash Flow ($/share) 12/2010 = 1.6
Cash Flow ($/share) 12/2009 = 1.27
Sales ($mil) 12/2011 = 1025
Sales ($mil) 12/2010 = 781
Sales ($mil) 12/2009 = 629
Annual EPS before NRI 12/2008 = 0.19
Annual EPS before NRI 12/2009 = 0.24
Annual EPS before NRI 12/2010 = 0.35
Annual EPS before NRI 12/2011 = 0.55
Disclaimer: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware
Sources: EPS, EPS surprise, broker recommendations, and price and consensus charts sourced from zacks.com. A significant portion of the historic data was obtained from zacks.com. Consensus estimate analysis table sourced from reuters.com. Free cash flow yield, income from cont operations, and revenue growth sourced from Ycharts.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.