Why Shares of 51job Inc. Slumped Today

MarketsMotley Fool

What happened

Shares of 51job Inc. (NASDAQ: JOBS) declined on Monday despite no meaningful news. The last development for the Chinese provider of integrated human resource services was a mixed quarterly report on Aug. 2. The stock was down about 9.9% at 3:15 p.m. EDT.

Continue Reading Below

So what

51job stock peaked in early July at around $115 per share. This peak came after a year-and-a-half-long rally that pushed up the stock by more than 200%. The stock now trades for around $65, down about 43% from that 52-week high.

A mixed second-quarter report is responsible for some of that decline. The company reported revenue of $135.3 million, up 33% year over year in local currency, and non-GAAP (generally accepted accounting principles) earnings per share of $0.82, up 63%. But while earnings came in ahead of analyst expectations, revenue missed by about $3.4 million, and guidance fell short of expectations as well.

The ongoing slump affecting Chinese stocks has likely driven some of 51job's decline: The S&P 500 China ETF has lost about 12% of its value since July 1. A lofty valuation may have also played a role; the company was valued at around $6.5 billion at its peak, about 14.7 times 2017 sales and 44.5 times 2017 non-GAAP net income.

Now what

While there's no specific news to connect to 51jobs' decline on Monday, the drop does extend a slump that has been ongoing for the past few months. Almost all the year-to-date gains for the stock have now been wiped out.

A solid third-quarter report later this year could turn the tide, but investors will need to wait until November for another update.

10 stocks we like better than 51jobWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and 51job wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends 51job. The Motley Fool has a disclosure policy.