Sina's (SINA) stock has been on a wild ride over the past 24 months, rising to over $140 a share before investors realized optimism about the stock is way too high and selling the shares to its current level of about $65 a share. Even as valuations have come down because of the stock's descent, the stock still looks expensive here on all levels besides one, the analyst price target. On a forward valuation, especially, the metric looks ridiculous with a forward PE of nearly 40. The growth is high here with analysts expecting revenue growth of 18% in FY12 followed by 25% in FY13. Still, the valuations look extreme here and I suggest investors use extreme caution purchasing the stock. Below is an in depth look at the valuation metrics and the wild stock chart.
Valuation: Sina's trailing 5 year valuation metrics suggest that the stock is overvalued as the metrics are above their respective 5 year averages. Sina's current P/B ratio is 3.8 and it has averaged 3.5 over the past 5 years with a high of 5.6 and low of 1.7. Sina's current P/S ratio is 8.4 and it has averaged 8.2 over the past 5 years with a high of 15.7 and low of 3.5.
Price Target: The consensus price target for the analysts who follow Sina is $86. That is upside of 32% from today's stock price of $65.23 and suggests that the stock is undervalued at these levels. This also suggests that the stock has significant upside and is an attractive opportunity at these levels.
Forward Valuation: Sina is currently trading at about $65 a share with analysts expecting EPS of $1.64 next year, an earnings increase of 156% y/y, for a forward P/E ratio of 39.8. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. NetEase.com (NTES) is currently trading at about $57 a share with analysts expecting EPS of $5.06 next year, an earnings increase of 13% y/y, for a forward P/E ratio of 11.2. Sohu.com (SOHU) is currently trading at about $53 a share with analysts expecting EPS of $4.59 next year, an earnings increase of 30% y/y, for a forward P/E ratio of 11.5. Yahoo (YHOO) is currently trading at about $15 a share with analysts expecting EPS of $0.94 next year, an earnings increase of 13% y/y, for a forward P/E ratio of 16. The mean forward P/E of Sina's competitors is 12.9 which suggests that Sina is overvalued relative to its publicly traded competitors.
Earnings Estimates: Sina has beat EPS estimates 2 times in the past 4 quarters. The company's EPS figures have come in between -1 cents and 3 cents from consensus estimates or about -3.8% to 13% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a some which suggests that the stock may experience some upside from earnings surprises.
Price Action: Sina is down 44.9% over the past year, underperforming the S&P 500, which is up 7.8%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $68.27 and below its 200 day moving average, which sits at $79.87.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.