Why Shares of 51job Inc. Slumped Today

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.

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.

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