Tickers in this Article: JRJC, TSCM, YHOO, GOOG, LFC, CHU
Leading online Chinese financial portal provider China Finance Online (Nasdaq:JRJC) again disappointed investors with anemic sales growth during its fourth quarter. Cash flow generation again picked up and was at impressive levels, but investor interest in the stock will likely remain negligible until the top line starts to consistently expand.

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Fourth Quarter Recap
Fourth quarter net revenues fell 1.3% to $14.8 million, despite a 44.3% jump in registered users to 20.2 million. Active paid subscribers also grew 32.3% to 156,000 and advertising revenue grew a healthy 14% year over year, while revenues related to providing brokerage-related services jumped 65.8%. Sales to institutions, which could include clients such as China Life Insurance (NYSE:LFC), also remained strong according to the company, meaning individual subscription revenue was the primary culprit for the total top-line decline and that an agreement with China Unicom (NYSE:CHU) to become its exclusive financial content provider has yet to bear fruit.

Costs of sales rose 3.4% from 2.28 million in the three months ending December 13, 2009 to 2.35 million in the current quarter. This helped send gross profit down 2.2% from $12.72 million to $12.43 million, and though management was able to reduce operating expenses by 10.5%, operating income was still negative at $1.18 million. Investment income and an investment gain reduced the bottom line loss, but net income was still negative at $37,000. This translated into zero earnings, based on more than 115 million diluted shares outstanding. (Defining how investments are managed and monitored can help investors meet their goals, check out Profit With Investment Policy Statements.)

Full-Year Review
Full-year sales increased 11.4% to $59.7 million while operating income was a negative $1.5 million. Interest income and an investment gain did push net income into positive territory for the full year as net earnings reached $1.9 million, or $0.09 per diluted share. Operating cash flow also again reached positive territory at $73.8 million. Subtracting out minimal capex of $173,000 left free cash flow at $73.6 million, or more than $3 per diluted share.

For the coming year, management currently projects net sales of $58 million and non-GAAP income of $3 million, or approximately 13 cents per diluted share. They also mentioned that they would be cautious with views on guidance due to "fluid macroeconomic conditions" and a sluggish Chinese stock market. They also see their ability to obtain and retain users as their competitive advantage going into the future.

Bottom Line
China Finance has not grown sales or net income consistently for some time, but is again generating solid cash flow from its operations. Its business model resembles that of Thestreet.com (Nasdaq:TSCM) or the finance sections of Yahoo (Nasdaq:YHOO) and Google (Nasdaq:GOOG), with the goal of motivating users to pay subscriptions for premium online content. (Learn more about finding and using information in The Flow Of Company Information.)

Its business continues to hold great potential given the market for individual investors in China is still in its infancy. In the meantime, it will grow advertising, brokerage and institutional revenue, though none appear to be growing briskly either. The stock will likely remain dead money until growth perks up, but it is good to see that cash flow generation has picked up again.

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