TM Editors' Note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated - do your own careful due diligence.

LightInTheBox (LITB) is an online sales company from the Chinese cohort of online retailers. This one differs from other Chinese e-commerce companies in that it primarily is targeting foreign online shoppers for Chinese goods.

Like many of its Chinese peers, LightInTheBox has had some issues with building an audience among U.S. stock buyers, but recently it has been on the radar of more of the investors we speak to, but more specifically, traders.

While we think the stock is great for traders who buy the valleys and sell the peaks, for our long-term investors we would not touch the stock here. The stock is dead money:

Source: Google finance

That action is terrible in the last few years. Abominable really. However, there have been peaks and valleys that can be traded in recent months:

Source: Google finance

As you can see there is an opportunity to trade the name. But why is it dead money?

Well, despite being headquartered in China, most sales come from Europe. We mentioned this retailer’s business model is to sell Chinese products internationally. While most product sales are to Europe, sales fell once again in the just reported 4^th quarter. Product sales from Europe were $44.5 million compared with $47.0 million in the same quarter of 2016, representing 53.5% of total product sales for the present Q4.

It is sad to say, but makes complete sense, that these declines weighed on overall the top line revenues. The same pattern persisted in North America but to a larger degree. Product sales from North America were $19.0 million, compared with $22.7 million last year. This is a decline of 16.3%, but there was no real explanation for this phenomenon.

Net revenues decreased 3.7% year over year to $91.6 million from $95.2 million last year. We surmise the patterns we saw were due to stiff competition, but it also likely reflects a lack of a clear plan to penetrate this market further. Finally, product sales from other countries were $19.6 million, roughly flat from a year ago. That is not good enough.

We have seen falling sales and the total cost of revenues was $64.4 million in the quarter. This is an increase relative to last year’s $63.4 million in the same period of 2016. After factoring in the top line as well as costs of revenues, we need to weigh operational expenses. We were pleased to see that total operating expenses fell 13.6% to $30.8 million, compared with $34.2 million last year. However, with the cost of sales and these operational expenses, there was yet another loss from operations. This quarter the company saw losses of $3.6 million in the fourth quarter of 2017.

As we look ahead, the company is penetrating new markets, which is a positive. This somewhat offsets the negative realities of falling sales in North America and in Europe. However, the company has no real plan to solve its top line issues, not to rein in costs and protect the bottom line. As such, long-term investors should avoid the name.