Commonly I am inclined to stray away from investing in Chinese firms since I think that there are enough well run American companies to invest my funds in. Though the one exception I have created to this rule during the past is a Chinese company known as Baidu (BIDU). For those who have never heard about Baidu, they own about 78% share of the online search industry inside China.
Since Google's IPO in 2004, its stock has increased about 493%, as well as its company is continuing to grow in worth from close to 35 billion to 208.93 billion. Since Baidu's IPO in 2005, its stock has gone up just about 1,077%, and its firm has expanded in cost from 4.3 billion to 50.39 billion. You might be wondering, "How is Baidu the Google of 8 years back if this has recently outperformed Google by HUGE margins?" To resolve that problem we must examine where the risk of the company's wages are GOING FORWARD, certainly not looking back.
BIDU is a business with massive progress prospects moving forward. Based on Yahoo Finance, the approximated growth rate for BIDU within the following five years is 44.81% in comparison with Google at 18.15%.
Presently, BIDU trades at 31 times 2012 earnings rates versus GOOG which trades at only 15 times 2012 estimates. This will likely lead you to assume that BIDU is blatantly overvalued just like you designated it a 15 times multiple like that of Google, you would get a stock price of $69.00, or even more than 50% lower than the very last concluding price of $144.32. Nevertheless as I mentioned in my Fundamental Analysis post, one essential factor we have to take into account when identifying what multiple to allocate a regular is its rate of growth.
If you factor in Baidu's growth rate of 44.81%, you can then calculate that BIDU has a PEG (Price to Earnings Growth) ratio of 0.70 (31.24 multiple divided by 44.81% growth). Evaluating this to Google's PEG ratio of 0.84, you can create the discussion that BIDU is really CHEAPER than Google though it at present trades at a higher multiple.
Since Google's IPO in 2004, its stock has increased about 493%, as well as its company is continuing to grow in worth from close to 35 billion to 208.93 billion. Since Baidu's IPO in 2005, its stock has gone up just about 1,077%, and its firm has expanded in cost from 4.3 billion to 50.39 billion. You might be wondering, "How is Baidu the Google of 8 years back if this has recently outperformed Google by HUGE margins?" To resolve that problem we must examine where the risk of the company's wages are GOING FORWARD, certainly not looking back.
BIDU is a business with massive progress prospects moving forward. Based on Yahoo Finance, the approximated growth rate for BIDU within the following five years is 44.81% in comparison with Google at 18.15%.
Presently, BIDU trades at 31 times 2012 earnings rates versus GOOG which trades at only 15 times 2012 estimates. This will likely lead you to assume that BIDU is blatantly overvalued just like you designated it a 15 times multiple like that of Google, you would get a stock price of $69.00, or even more than 50% lower than the very last concluding price of $144.32. Nevertheless as I mentioned in my Fundamental Analysis post, one essential factor we have to take into account when identifying what multiple to allocate a regular is its rate of growth.
If you factor in Baidu's growth rate of 44.81%, you can then calculate that BIDU has a PEG (Price to Earnings Growth) ratio of 0.70 (31.24 multiple divided by 44.81% growth). Evaluating this to Google's PEG ratio of 0.84, you can create the discussion that BIDU is really CHEAPER than Google though it at present trades at a higher multiple.
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