A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
Here we focus on Fang Holdings Limited , a business services stock, which is expected to register more than 100% earnings per share growth in 2018. Earnings are expected to increase 29.6% next year.
Fang’s top line has been weak in recent times because of a decline in its e-commerce services revenues, which have been affected by the company’s reversion to a technology-driven platform model. This probably impacted share price that has declined 34.2% over the past six months against the 21.2% rally of the industry it belongs to. The stock is likely to recover upon completion of the transition and the company records improvement in revenues.
Fang Holdings Limited Revenue (TTM)
Here Are Some Other Growth Factors
Improving operational metrics is a major positive for Fang. The company is reducing operating expenses by downsizing its e-commerce services and reducing costs associated with advertisements, promotions and sales commission. In the first half of 2018, operating income totaled $12.8 million compared to an operating loss of 12.2 million for the corresponding period last year.
Furthermore, Fang’s efforts to strengthen marketing services are appreciable. The company is offering customized marketing and promotional packages with additional features via website advertising to meet the varying customers’ requirements.
It continues to collaborate (for 1-3 years) with well-known Internet portals for attracting additional users to its websites and mobile apps. Presently, Fang has partnerships with some of the leading Chinese-language portals. Moving ahead, the company remains optimistic about generating more profits by delivering innovative marketing services without bearing any significant additional costs.
Also, Fang is witnessing solid demand for its database and research services. This is evident from growth across its value-added services segment, which provides access to the company’s information database and industry-related research reports. In the first half of 2018, revenues from value-added services summed $15 million, up 11.4% on a year-over-year basis.
Zacks Rank & Key Picks
Currently, Fang carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Business Services sector are CRA International (CRAI - Free Report) , NV5 Global (NVEE - Free Report) and Information Services Group (III - Free Report) . While CRA International sports a Zacks Rank #1, NV5 Global and Information Services Group carry a Zacks Rank #2 (Buy).
CRA International, NV5 Global and Information Services Group have delivered an average four-quarter positive earnings surprise of 58.3%, 12.7% and 5.5%, respectively.
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