Stock Valuation: Fang Holdings Ltd (SFUN)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
FANG HOLDINGS LTD China/
NYSE
Technology – Online Media – Internet Content & Information USD4.52
@ 16 Jun 2018
COMPANY PROFILE Fang Holdings Limited is a provider of online real estate business services. Through its website, the company sells new and second homes and provides financial services to real estate customers.

Fang Holdings Limited operates in the Chinese internet portal industry. The company handles a real estate business through its web platform, www.fang.com and a mobile application. The website serves as a one-stop avenue for the users to buy new and second homes, office buildings and accommodation facilities available for rent in different parts of China. Real estate buyers can also avail of other services such as entrusted loans, mortgage loans and other financial services that the company provides in the event of its credit assessment requirements being fulfilled. The group generates most of its revenues from new home sales through its e-commerce platform. A part of its income is also derived from marketing, listing and financial services.

GDR/ADR Code SFUN
Stock Valuation Below

Fang Holdings Price to Cash Flow

Price to Cash Flow is an alternative method to value shares. This is because accounting profits can be subject to manipulation. Therefore, some investors prefer to value a company based on cash flows generated by the operating activities of the company. It also acts as a reality check to valuation measures such as Price to Earnings and Price to Sales. If a company generates high profits and sales but not operating cash flows, it could be heading for trouble because it is cash that pays the operating expenses. However, the Price to Cash Flow ratio of most firms are volatile and should not be used in isolation to determine the valuation of the stock.
At the price of USD4.52 as at 16 Jun 2018, Fang Holdings Ltd is trading at a Price to Cash Flow Ratio of 17.2 times last 12 months cash flow.  This is a 38.0% premium to its historical average Price to Cash Flow Ratio of 12.5 times.
Is the stock overvalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Price to Sales chart is from ProThinker Stock Report. Company description, historical financial statements data and price data are from gurufocus.com. Estimates are from gurufocus and/or 4-traders.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

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