Chinese Internet portal SinaCorp (NASDAQ:SINA) broke a string of unimpressive earnings announcements last quarter, exceeding analyst estimates for the first time since Q3 2004. Is this the start of a new, more encouraging trend? We'll find out when the company reports its Q2 2006 numbers tomorrow.

What analysts say:

  • Buy, sell, or waffle? Fourteen analysts now follow Sina. Four of them rate it a buy, nine a hold, and one a sell.
  • Revenues. Revenues are expected to rise 6% to $49 million.
  • Earnings. Profits seem headed the other way. The consensus is that they declined 14% during the second quarter and will come in at $0.18 per share tomorrow.

What management says:
Judging from its SEC filings, Sina has had little to tell investors since last it reported earnings. As for what it said then -- no need to repeat myself. Just click through here and read it fresh.

What management does:
At this rate, Sina may feel that it's better to say nothing, keep its head down, and just hope investors don't notice it -- or how badly it's been doing. Gross margins haven't been hurt too badly, granted, but its rolling operating and net margins have been battered, leaving the company nearly 40% less profitable today than it was just 18 months ago.

Margins %

12/04

3/05

6/05

9/05

12/05

3/06

Gross

69.2

68.7

68.2

68.1

67.4

66.1

Op.

33.1

29.4

26.7

23.3

21.5

20.4

Net

33.0

29.5

25.9

23.6

22.3

20.5

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Yet despite the falloff in profitability, the stock is actually only down about 15% since Fool co-founder and Stock Advisor co-analyst David Gardner recommended it. In fact, it's down that much against both times that he recommended it.

So what does he think about the company today? Investing with a five-year time horizon in mind, David remains unswayed by Sina's disappointing performance in the first two years of its time in the portfolio. He urges investors to ignore the stock-price fluctuations and keep their eyes on the business, pointing out that "Sina is China's wireless portal of choice, and has become an advertising powerhouse in the world's fastest-growing ad market."

For my part, I'm going to take issue with David on -- as usual -- valuation. I see Sina's $34 million in free cash flow (FCF), its $940 million in enterprise value (EV), and the resulting EV/FCF ratio of 28 and think: pricey! Checking the analysts' projected growth rate, which is 16.5% per annum, long-term, I think: pricey and not growing fast enough to justify the price tag.

Which opinion do you agree with? I prefer mine, but David is the one beating the market by 16 percentage points since Stock Advisor opened for business four years ago.

Hard to believe that he's beating the market by investing in apparently overpriced stocks? Double-check me. Sign up for a free trial of our Stock Advisor service, and you'll find a real-time scorecard showing all our recommendations, and how they've fared, laid out in red and green.

Competitors:

  • 51job Inc. (NASDAQ:JOBS)
  • Baidu.com (NASDAQ:BIDU)
  • CDC Corp (NASDAQ:CHINA)
  • eBay (NASDAQ:EBAY)
  • Google (NASDAQ:GOOG)
  • TOM Online (NASDAQ:TOMO)

Fool contributor Rich Smith does not own shares of any company named above. eBay and TOM Online are also Stock Advisor picks. The Fool has a disclosure policy.