Inside Baidu’s price and valuation multiples
Baidu’s current book value per share of $41.9 compares with its expected book value per share of $46.7 in 2017. Baidu (BIDU) stock is trading at a price-to-book value of ~5.2x.
In comparison, peer companies Amazon (AMZN), Groupon (GRPN), Alibaba (BABA), and Yelp (YELP) have current book values per share of ~$48.5, ~$0.33, ~$17.4, and ~$10.9, respectively. The company’s price-to-sales ratio of ~6.9x compares with its estimated price-to-sales ratio of ~5.9x for 2017.
What’s Baidu’s debt position?
Baidu is carrying a total debt of ~$12.3 billion, which includes its short-term debt of ~$7.3 billion and its long-term debt of ~$5.0 billion. Given the company has total capital of ~$27.8 billion, its total-debt-to-total-capital ratio comes to 44.4%. The company has debt-to-asset, debt-to-equity, and debt-to-EBITDA ratios of 0.38x, 84.8x, 4.3x, respectively.
Can Baidu easily pay interest on its outstanding debt? The answer to this question comes from examining the company’s EBIT on its interest ratio, also called the interest coverage ratio, which in this case is 34.9x. This ratio sheds light on the company’s ability to pay interest on its debt.
As for debt on the economic value of the company, Baidu has debt on enterprise value of 17%.
Examining Baidu’s cash flow metrics
Baidu has $17.3 billion as cash on hand. Its price-to-cash-flow and price-to-free-cash-flow are 23.1x and 46.9x, respectively. For the trailing 12 months, the company’s EV-to-cash flow ratio was 21.9x and its EV to free cash flow was 44.5x.
Earnings and sales
The EPS for last year came on total sales of $10.9 billion, which rose 4% annually. Sales for this year are expected to expand to ~$13.3 billion in 2016 to ~$16.2 billion next year.
Baidu was the third largest Internet player in terms of market capitalization globally at $79.5 billion. In comparison, Amazon was at ~$464 billion, Groupon was at ~$2.4 billion, Alibaba was at ~$432.8 billion, and Yelp was at ~$3.6 billion.
Of the 33 analysts covering Baidu, 18 have given it “buy” recommendations, three have recommended a “sell,” and 12 have recommended a “hold.”