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What: Shares of Chinese insurer CNinsure
So what: CNinsure's report showed another quarter of double-digit growth. The company reported quarterly revenue of $68 million and earnings of $0.37 for the quarter. CNinsure cited strength in its growing life insurance and property and casualty business as the main drivers behind its impressive growth. These results compare to consensus estimates that called for revenue of $69.3 million and earnings of $0.34.
Now what: It's clear that investor sentiment is deflated following the company's revenue miss. What might seem like a great growth story has me somewhat skeptical. Some of the figures highlighted in this quarterly filing lead me to believe this growth rate is simply unsustainable. Revenue grew 26% year over year, but expenses jumped by 29%. Operating margins also fell 1.5% year over year. Perhaps the biggest red flag is that share-based compensation increased by 299% despite a precipitous yearlong fall in its stock price. Personally, I'd pass on CNinsure in favor of larger insurers such as Travelers
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