Which Chinese Internet Stocks have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 Chinese internet stocks rank via earnings trends:

Sohu.com Inc. (NASDAQ:SOHU): Current Price $46.81

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 188.93 429.05 515.24 612.78 852.09
Diluted EPS ($) 0.90 4.06 3.57 3.62 3.93

Sohu is growing both its revenue and EPS nicely during this period, though EPS lags the kind of growth visible on the topline.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 232.86 246.15 226.60 255.73 285.38
Diluted EPS ($) 1.17 0.65 0.53 0.28 0.63

Quarterly EPS headed south in the June 2012 quarter, but certainly grew impressively in the latest quarter. We’d like to keep Sohu on our radar…

Changyou.com Limited (NASDAQ:CYOU): Current Price $30.48

Fiscal Year 2009 2010 2011 2012
Revenue ($) in millions 267.58 327.15 484.57 623.4
Diluted EPS ($) 2.81 3.29 4.61 5.29

We are certainly impressed with the way revenue and EPS are improving every year at this Chinese online game developer and operator.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 137.65 136.76 147.34 165.78 173.54
Diluted EPS ($) 1.21 1.22 1.29 1.37 1.41

The quarterly EPS too has grown every quarter over this period. This is one impressive candidate…

Baidu, Inc. (NASDAQ:BIDU): Current Price $94.32

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 460.54 651.60 1,171 2,248 3,540
Diluted EPS ($) 0.443 0.626 1.53 3.02 4.79

Revenue and EPS at this Chinese online search provider are going up by leaps and bounds every year. The topline has grown over nine times between 2007 and 2011, and the EPS, over 12 times.

These stocks are hitting our Profit Targets. Click here now to discover winning stocks!

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 710.90 677.10 858.80 994.60 1017
Diluted EPS ($) 0.93 0.85 1.24 1.37 1.28

Baidu was maintaining the momentum in its quarterly numbers, but recent quarterly revenue declined…

Sina Corp. (NASDAQ:SINA): Current Price $56

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 246.13 369.59 358.57 402.62 482.83
Diluted EPS ($) 0.97 1.33 6.95 -0.31 -4.64

Profitability has gone for a toss in the last two years at this online media company, which operates the famous Weibo microblogging service, though revenue is growing every year.

These stocks are hitting our Profit Targets. Click here now to discover winning stocks!

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 130.29 133.37 106.22 131.60 152.38
Diluted EPS ($) -5.10 0.08 -0.21 0.49 0.14

But the quarterly EPS is too jumpy for our liking, and the last quarter is a rather low number. We’ll skip Sina Corp…

Renren Inc (NYSE:RENN): Current Price $3.23

Fiscal Year 2010 2011
Revenue ($) in millions 76.54 117.96
Diluted EPS ($) -0.94 0.14

We see that both revenue and EPS have improved during 2011 at this Chinese social networking internet platform.

These stocks are hitting our Profit Targets. Click here now to discover winning stocks!

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 34.21 32.81 32.08 44.82 44.82
Diluted EPS ($) 0.00 0.11 -0.03 -0.06 -0.06

Revenue has grown every quarter, though EPS continues to be in the red. We’ll pass on this one.

Conclusion

Changyou.com stands head and shoulders above the crowd in this  ”E-Squared” investment analysis of Chinese internet stocks because it has the strongest earnings growth both annually and quarter-over-quarter.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!