Baidu shares fell by -2.7% during the day's afternoon session, and are now trading at a price of $131.71. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
an Exceptionally Low P/B Ratio but Its Shares Are Expensive:
Baidu, Inc. provides online marketing and non-marketing value added services through an internet platform in the People's Republic of China. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 30.44 and an average price to book (P/B) ratio of 4.19. In contrast, Baidu has a trailing 12 month P/E ratio of 12.0 and a P/B ratio of 0.16.
Baidu has moved 28.7% over the last year compared to 15.1% for the S&P 500 — a difference of 13.6%. Baidu has a 52 week high of $141.6 and a 52 week low of $74.71.
Summary of the Company's Finances:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $15,429 | $16,410 | $19,536 | $17,931 | $18,958 | $18,238 |
| Gross Margins | 41% | 48% | 48% | 48% | 52% | 50% |
| Net Margins | 2% | 21% | 8% | 6% | 15% | 18% |
| Net Income (M) | $296 | $3,444 | $1,605 | $1,096 | $2,861 | $3,255 |
| Net Interest Expense (M) | $425 | $476 | $537 | $422 | $457 | $387 |
| Depreciation & Amort. (M) | $807 | $885 | $923 | $939 | $1,041 | $938 |
| Diluted Shares (M) | 35 | 2,756 | 2,814 | 2,809 | 2,837 | 2,798 |
| Earnings Per Share | $8.49 | $1.25 | $0.57 | $0.39 | $1.01 | $1.16 |
| EPS Growth | n/a | -85.28% | -54.4% | -31.58% | 158.97% | 14.85% |
| Free Cash Flow (M) | $3,165 | $2,930 | $1,448 | $2,593 | $3,581 | $1,795 |
| CAPEX (M) | $923 | $779 | $1,710 | $1,201 | $1,576 | $1,114 |
| Total Debt (M) | $6,221 | $7,419 | $8,414 | $6,785 | $5,777 | $4,935 |
| Net Debt / EBITDA | 0.83 | 0.63 | 1.02 | -0.28 | 0.54 | 0.4 |
| Current Ratio | 2.89 | 2.68 | 2.86 | 2.67 | 3.01 | 2.09 |
Baidu has an excellent current ratio of 2.09, slight revenue growth and increasing reinvestment in the business, and healthy leverage levels. However, Baidu has slimmer gross margins than its peers, declining EPS growth, and positive cash flows.
