It hasn't been a great morning session for PDD investors, who have watched their shares sink by -1.4% to a price of $116.22. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
an Exceptionally Low P/B Ratio but Priced at a Premium:
PDD Holdings Inc., a multinational commerce group, owns and operates a portfolio of businesses. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, PDD has a trailing 12 month P/E ratio of 26.5 and a P/B ratio of 0.85.
PDD's PEG ratio is 26.51, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Wider Gross Margins Than the Industry Average of 31.2%:
| 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|
| Revenue (M) | $1,908 | $4,330 | $9,118 | $14,743 | $18,929 |
| Gross Margins | 78% | 79% | 68% | 66% | 76% |
| Net Margins | -78% | -23% | -12% | 8% | 24% |
| Net Income (M) | -$1,486 | -$1,001 | -$1,100 | $1,219 | $4,573 |
| Net Interest Expense (M) | $11 | $21 | $116 | $193 | $7 |
| Depreciation & Amort. (M) | $72 | $92 | $100 | $235 | $322 |
| Diluted Shares (M) | 2,968 | 4,627 | 4,768 | 5,714 | 5,761 |
| Earnings Per Share | -$0.5 | -$0.22 | -$0.23 | $0.21 | $0.79 |
| EPS Growth | n/a | 56.0% | -4.55% | 191.3% | 276.19% |
| Free Cash Flow (M) | $1,126 | $2,125 | $4,315 | $4,486 | $7,013 |
| CAPEX (M) | $4 | $4 | $7 | $31 | $20 |
| Current Ratio | 1.66 | 1.6 | 1.78 | 1.72 | 1.85 |
PDD benefits from rapidly growing revenues and increasing reinvestment in the business, exceptional EPS growth, and generally positive cash flows. The company's financial statements show wider gross margins than its peer group and a decent current ratio of 1.85.
