Chinese search engine behemoth Baidu’s stock (NASDAQ
NDAQ
IDU
IQ
Notably, BIDU stock had a Sharpe Ratio of 0.1 since early 2017, which is lower than the figure of 0.6 for the S&P 500 Index over the same period. Compare this with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
So, is the stock still a buy at current levels of about $147 per share? We believe it is. Baidu trades at just about 14x consensus 2023 earnings. This is well below the nearly 40x multiple the company traded at back in February 2021. Moreover, Baidu had a sizable net cash position of over $17 billion as of the end of Q2 2023, accounting for about a third of the company’s current market cap. This means that the company’s 2023 P/E multiple, ex-cash would stand at a mere 9.5x, making the stock an even better value. We value Baidu stock at about $165 per share, which is 30% ahead of the market price. See our analysis of Baidu Revenue and Baidu Valuation for more details on how the company’s revenues are trending and how its valuation compares with peers.
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