It's been a great afternoon session for PDD investors, who saw their shares rise 2.9% to a price of $149.29 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
an Exceptionally Low P/B Ratio but Its Shares Are Expensive:
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 22.15 and an average price to book (P/B) ratio of 3.11. In contrast, PDD has a trailing 12 month P/E ratio of 19.5 and a P/B ratio of 0.94.
PDD's PEG ratio is 14.01, 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 46.22%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $1,908 | $4,330 | $9,118 | $14,743 | $18,929 | $34,879 |
| Gross Margins | 78% | 79% | 68% | 66% | 76% | 63% |
| Net Margins | -78% | -23% | -12% | 8% | 24% | 24% |
| Net Income (M) | -$1,486 | -$1,001 | -$1,100 | $1,219 | $4,573 | $8,455 |
| Net Interest Expense (M) | $11 | $21 | $116 | $193 | $7 | $6 |
| Depreciation & Amort. (M) | $72 | $92 | $100 | $235 | $322 | $111 |
| Diluted Shares (M) | 2,968 | 4,627 | 4,768 | 5,714 | 5,761 | 5,840 |
| Earnings Per Share | -$0.5 | -$0.22 | -$0.23 | $0.21 | $0.79 | $1.45 |
| EPS Growth | n/a | 56.0% | -4.55% | 191.3% | 276.19% | 83.54% |
| Free Cash Flow (M) | $1,126 | $2,125 | $4,315 | $4,486 | $7,013 | $13,226 |
| CAPEX (M) | $4 | $4 | $7 | $31 | $20 | $36 |
| Current Ratio | 1.66 | 1.6 | 1.78 | 1.72 | 1.85 | 1.93 |
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 1.93.
