Filed under: Internet, Stocks to Sell

Citron Research, formerly known as StockLemon.com, brings to our attention China Finance Online Co. (ADR) (NASDAQ: JRJC), which sells a series of stock tip newsletters in China. After taking a look at the company, I have to agree with Citron’s conclusions: This stock is heinously overvalued.

First a quick look at the numbers. This publisher of newsletters trades at more than 65 times sales with a price/earnings ratio of 873. Given that the company’s business model is selling stock tip newsletters with an army of telemarketers, I can’t even imagine what the company’s barrier to entry is that makes it worth such an astronomical valuation — a market cap of $925 million dollars.

As Stock Lemon points out, this is all on projected revenue of about $20 million for 2007: “Comparatively speaking TheStreet.com (NASDAQ: TSCM) generated $57 million in revenue and has a market cap of about 1/3rd this name.”

Why is JRJC trading so high? It probably has something to do with investors’ desire to find something that is tied to the Chinese stock market’s rapid growth. But at this valuation, whatever it is, it sure as heck has nothing to do with rational thought.

JRJC looks like a pretty good short here.

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This entry was posted on Wednesday, October 3rd, 2007 at 8:33 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.