Annual Dividend Rate
NA Annual Dividend YieldNA Beta2.54 Market Capitalization$337.5 Million 52-Week Range$2.72-$5.45 Price as of 6/23/2016$3.92 Sector: Technology Sub-Industry: Application Software Source: S&P
NQ BUSINESS DESCRIPTION
NQ Mobile Inc. provides mobile Internet services in the People's Republic of China and internationally. The company provides products and services in the areas of mobile security, privacy, optimization, personalized cloud, and family protection. STOCK PERFORMANCE (%)
3 Mo. 1 Yr. 3 Yr (Ann)
Price Change -9.89 -26.32 -20.63
GROWTH (%)
Last Qtr 12 Mo. 3 Yr CAGR
Revenues -17.57 14.42 53.07
Net Income 54.07 110.97 -7.99
EPS 57.90 109.63 -25.05
RETURN ON EQUITY (%)
NQ Ind Avg S&P 500
Q1 2016 1.70 11.29 11.95 Q1 2015 -15.24 12.07 14.20 Q1 2014 -6.89 16.21 14.48 P/E COMPARISON 49.00 NQ 63.80 Ind Avg 24.43 S&P 500 EPS ANALYSIS¹ ($) 2016 Q 1 -0 .0 8 2015 Q 4 0. 21 Q 3 -0 .0 3 Q 2 -0 .0 2 Q 1 -0 .1 9 2014 Q 4 -0 .2 3 Q 3 -0 .1 9 Q 2 -0 .2 2 Q 1 -0 .3 4
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental data items.
Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years
2015 2016 2 4 6 8 10 12 14 Rating History SELL HOLD 0 20 40 60 Volume in Millions
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History RECOMMENDATION
We rate NQ MOBILE INC -ADR (NQ) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and poor profit margins. HIGHLIGHTS
NQ's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.32%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
The gross profit margin for NQ MOBILE INC -ADR is rather low; currently it is at 24.07%. Regardless of NQ's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NQ's net profit margin of -10.64% significantly underperformed when compared to the industry average.
The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market on the basis of return on equity, NQ MOBILE INC -ADR underperformed against that of the industry average and is significantly less than that of the S&P 500. NQ, with its decline in revenue, underperformed when compared the industry average of 8.8%. Since the same quarter one year prior, revenues fell by 17.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
PEER GROUP ANALYSIS
REVENUE GROWTH AND EBITDA MARGIN*
EBITDA Margin (TTM) R ev en ue G ro w th (T TM ) -2 0% 70 % 0% -90% FA VO RA BLE UN FA VO RA BLE WK WKWK WK WK MODN MODNMODN MODN MODN QADA QADAQADA QADA QADA QADB QADBQADB QADB QADB MTLS MTLS MTLS MTLSMTLS TNGO TNGO TNGO TNGO TNGO GLUU GLUUGLUU GLUU GLUU JIVE JIVE JIVE JIVE JIVE DMRC DMRCDMRC DMRC DMRC
Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $287.1 Million and $396.4 Million. Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization.
REVENUE GROWTH AND EARNINGS YIELD
Earnings Yield (TTM) R ev en ue G ro w th (T TM ) -2 0% 70 % 5% -12.5% FA VO RA BLE UN FA VO RA BLE WK WKWK WK WK MODN MODN MODN MODNMODN QADA QADA QADA QADAQADA QADB QADBQADB QADB QADB MTLS MTLSMTLS MTLS MTLS TNGO TNGOTNGO TNGO TNGO GLUU GLUU GLUU GLUU GLUU MGIC MGIC MGIC MGIC MGIC JIVE JIVE JIVE JIVE JIVE DMRC DMRC DMRC DMRCDMRC NQ NQ NQ NQNQ
Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -10.9% and 65.9%. Companies with NA or NM values do not appear.
INDUSTRY ANALYSIS
The US software industry is characterized by growth, innovation and technological advancements. The business remains knowledge intensive and market structure is influenced by ownership of intellectual property. Technology and product innovation shape business models in a rapidly changing environment. The industry can be divided into three main categories: systems software, programming software, and application software.
The industry landscape has seen radical change in recent years due to the growth of mass markets for packaged software. Software development has witnessed rapid evolution over the past few decades with projects increasing in size and complexity as the available computer hardware has dramatically improved in both processing speed and storage size.
The number of patents being issued across the industry has recently surged. Ownership of intellectual property is a key driver of growth and the patent system plays a vital role in the development of the industry. However, piracy remains a pressing issue as copyright infringement and illegal reproduction and transfer of licensed software is widespread.
The software industry is not immune to the global economy. The return to positive slow growth will positively impact all industries and enhance new investments, which could bolster demand for services and add to sales growth in the upcoming quarters. The need to lower costs has triggered global capabilities to evolve in China and India. India, for instance, has emerged as the number two software talent pool worldwide, capturing more than a quarter of the global outsourcing market. The industry is currently positioned favorably going forward.
PEER GROUP: Software
Recent Market Price/ Net Sales Net Income
Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M)
NQ NQ MOBILE INC -ADR 3.92 338 49.00 391.02 7.91
WK WORKIVA INC 13.64 396 NM 154.67 -48.00
MODN MODEL N INC 13.59 374 NM 99.54 -27.45
QADA QAD INC 19.88 366 73.63 273.98 5.62
QADB QAD INC 17.50 366 64.81 273.98 5.62
MTLS MATERIALISE NV -ADR 7.37 349 NM 116.10 -5.74
TNGO TANGOE INC 8.06 318 NM 219.45 -4.12
GLUU GLU MOBILE INC 2.39 316 NM 234.96 -16.86
MGIC MAGIC SOFTWARE ENTERPRISES 6.90 306 20.29 180.36 15.62
JIVE JIVE SOFTWARE INC 3.95 303 NM 199.33 -34.10
DMRC DIGIMARC CORP 31.61 287 NM 21.78 -19.22
COMPANY DESCRIPTION
NQ Mobile Inc. provides mobile Internet services in the People's Republic of China and internationally. The company provides products and services in the areas of mobile security, privacy, optimization, personalized cloud, and family protection. It operates through two segments, Consumer and Enterprise. The company offers NQ Mobile Security, a mobile security product that protects users' mobile data from viruses, malware, hackers, and spyware; NQ Mobile Vault, which helps users' control pictures, videos, contacts, SMS, and call logs; Android Booster and Super Task Killer that tune users' smart devices to achieve optimum performance; NQ Family Guardian, which allows parents to monitor and protect their children's smart device activities; and cloud security SDK that allows third-party developers to incorporate the function to their applications and products. It also provides mobile entertainment applications and platforms, including Showself Live Video, a live mobile social video platform, which facilitates real-time video shows, enables mobile users to interact and socialize with hosts, and offers a series of in-show mobile games; Showself Desktop, a
personalized interactive and programmable mobile desktop application that offers dynamic and themed-wallpaper, and desktop applications; and Showself Music Radar, which provides automatic audio content recognition services, as well as publishes mobile games for third-parties. In addition, NQ Mobile Inc. offers enterprise mobility solutions and services, including system management, application development, business intelligence, and maintenance services, as well as provides advertising and customer support services. The company was formerly known as NetQin Mobile Inc. and changed its name to NQ Mobile Inc. in April 2012. NQ Mobile Inc. was founded in 2005 and is
headquartered in Beijing, the People's Republic of China. NQ MOBILE INC -ADR
No. 4 Building, 11 Heping Li East Street, Dongchen Beijing 100013 CYM Phone: 86 10 8565 555 http://www.nq.com Employees: 1000 STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of NQ shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock’s valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR SCORE
Growth
1.5
out of 5 starsMeasures the growth of both the company's income statement and cash flow. On this factor, NQ has a growth score better than 20% of the stocks we rate.
weak strong
Total Return
1.0
out of 5 starsMeasures the historical price movement of the stock. The stock performance of this company has beaten 10% of the companies we cover.
weak strong
Efficiency
2.0
out of 5 starsMeasures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 30% of the companies we review.
weak strong
Price volatility
1.5
out of 5 starsMeasures the volatility of the company's stock price historically. The stock is less volatile than 20% of the stocks we monitor.
weak strong
Solvency
1.0
out of 5 starsMeasures the solvency of the company based on several ratios. The company is more solvent than 10% of the companies we analyze.
weak strong
Income
0.5
out of 5 starsMeasures dividend yield and payouts to shareholders. This company pays no dividends.
weak strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks.
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.02 Q2 FY16 0.18 E 2016(E) NA NA INCOME STATEMENT Q1 FY16 Q1 FY15
Net Sales ($mil) 73.53 89.20
EBITDA ($mil) NA NA
EBIT ($mil) -7.26 -16.83
Net Income ($mil) -7.83 -17.05
BALANCE SHEET
Q1 FY16 Q1 FY15
Cash & Equiv. ($mil) 197.98 270.46
Total Assets ($mil) 815.23 832.26
Total Debt ($mil) 172.50 172.50
Equity ($mil) 462.81 473.08
PROFITABILITY
Q1 FY16 Q1 FY15
Gross Profit Margin 24.07% 19.90%
EBITDA Margin NA NA Operating Margin -9.87% -18.86% Sales Turnover 0.48 0.41 Return on Assets 0.97% -8.66% Return on Equity 1.70% -15.24% DEBT Q1 FY16 Q1 FY15 Current Ratio 1.28 4.18 Debt/Capital 0.27 0.27 Interest Expense 1.59 0.84 Interest Coverage -4.56 -20.01 SHARE DATA Q1 FY16 Q1 FY15
Shares outstanding (mil) 96 91
Div / share 0.00 0.00
EPS -0.08 -0.19
Book value / share 4.83 5.18
Institutional Own % NA NA
Avg Daily Volume 970,467 921,160
2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates.
FINANCIAL ANALYSIS
NQ MOBILE INC -ADR's gross profit margin for the first quarter of its fiscal year 2016 has increased when compared to the same period a year ago. Even though sales decreased, the net income has increased. NQ MOBILE INC -ADR has average liquidity. Currently, the Quick Ratio is 1.09 which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year, indicating deteriorating cash flow.
During the same period, stockholders' equity ("net worth") has remained virtually unchanged only decreasing by 2.17% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.TheStreetRatings.com.
RATINGS HISTORY
Our rating for NQ MOBILE INC -ADR was recently downgraded from Hold to Sell on 5/31/2016. As of 6/23/2016, the stock was trading at a price of $3.92 which is 28.1% below its 52-week high of $5.45 and 44.1% above its 52-week low of $2.72.
2 Year Chart 2014 2015 $5 $8 $10 S E LL : $ 4. 27 S E LL : $ 7. 19
MOST RECENT RATINGS CHANGES
Date Price Action From To
5/31/16 $4.27 Downgrade Hold Sell
3/24/16 $4.88 Upgrade Sell Hold
6/23/14 $7.19 No Change Sell Sell
Price reflects the closing price as of the date listed, if available
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS (as of 6/23/2016)
38.42% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of more than 10% over the next 12 months.
31.33% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 30.25% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns.
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Research Contact: 212-321-5381 Sales Contact: 866-321-8726VALUATION
SELL. The current P/E ratio indicates a significant discount compared to an average of 63.80 for the Software industry and a significant premium compared to the S&P 500 average of 24.43. For additional comparison, its price-to-book ratio of 0.81 indicates a significant discount versus the S&P 500 average of 2.79 and a significant discount versus the industry average of 6.69. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, NQ MOBILE INC -ADR proves to trade at a discount to investment alternatives within the industry.
1
2
3
4
5
Price/Earnings
premium discount
NQ 49.00 Peers 63.80
• Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations.
• NQ is trading at a discount to its peers.
1
2
3
4
5
Price/CashFlow
premium discount
NQ NA Peers 21.10
• Neutral. The P/CF ratio is the stock’s price divided by the sum of the company's cash flow from operations. It is useful for comparing companies with different capital requirements or financing structures.
• Ratio not available.
1
2
3
4
5
Price/Projected Earnings
premium discount
NQ NA Peers 52.15
• Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations.
• NQ is trading at a significant discount to its peers.
1
2
3
4
5
Price to Earnings/Growth
premium discount
NQ NM Peers 0.77
• Neutral. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples.
• NQ's negative PEG ratio makes this valuation measure meaningless.
1
2
3
4
5
Price/Book
premium discount
NQ 0.81 Peers 6.69
• Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet.
• NQ is trading at a significant discount to its peers.
1
2
3
4
5
Earnings Growth
lower higher
NQ 109.63 Peers -40.61
• Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher
price-to-earnings ratios.
• NQ is expected to have an earnings growth rate that significantly exceeds its peers.
1
2
3
4
5
Price/Sales
premium discount
NQ 0.96 Peers 5.67
• Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. • NQ is trading at a significant discount to its industry
on this measurement.
1
2
3
4
5
Sales Growth
lower higher
NQ 14.42 Peers 5.72
• Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share.
• NQ has a sales growth rate that significantly exceeds its peers.
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
