Facts to Consider Before You Bet on It
Baidu Inc. Zacks.com visitors have been closely following (BIDU), one of the most important stocks. It might be worthwhile to examine some factors that could affect the stock’s near-term performance.
Over the past month, shares of this web search company have returned +2.8%, compared to the Zacks S&P 500 composite’s -4.4% change. The Zacks Internet – Services, where Baidu Inc. belongs, has experienced a 9.9% drop during this time. The question is now: What will the stock do in the future?
Even though media reports and rumors about major changes in a company’s business prospects can cause stock to trend and prompt price movements, there are still fundamental factors that drive the decision to buy or hold.
Earnings Estimate Revisions
Zacks places a high value on the company’s projected future earnings. Because we believe that the fair market value of a stock is determined by the future value of its earnings stream.
Our analysis is essentially based upon how the sell-side analysts covering the stock revise their earnings estimates to account for the latest business trends. If earnings estimates for a company rise, its fair value for stock also goes up. Stocks with a fair value higher than their current market price are more popular among investors, which leads to a rise in stock prices. Evidence from empirical studies shows a strong correlation between earnings estimates revision trends and stock price movements in the short-term.
Baidu Inc. expects to report earnings of $2.52 per shares for the current quarter. This is an increase of +38.5% over the previous year. Over the past 30 days, the Zacks Consensus Estimate has remained constant.
Consensus earnings estimates of $8.67 for current fiscal year indicate a +3.2% year-over year change. Over the past 30 days, this estimate has remained constant.
The consensus earnings estimate of $10.92 for the next fiscal years indicates a +26% change from the report Baidu Inc. reported a year ago. This estimate has remained constant over the last month.
Our proprietary stock rating tool, the Zacks Rank, has an impressive track record and is more reliable than any other indicator of a stock’s near-term performance. It effectively harnesses earnings estimate revisions to provide a better indicator of a stock’s near-term price performance. Baidu Inc. is ranked #3 on the Zacks Rank (Hold) due to the magnitude of the recent revision in the consensus estimate.
The chart below illustrates the evolution in the company’s 12-month forward consensus EPS estimate.
12 Month EPS
Projectioned Revenue Growth
Earnings growth is the best indicator of a company’s financial health. However, it doesn’t mean that a business can grow its revenue. It’s almost impossible for a company increase its earnings over a long period of time without increasing its revenue. It is important to understand a company’s potential revenue growth.
Baidu Inc.’s consensus sales estimate for the current quarter of $4.76 Billion indicates a year-overyear increase of -8.4%. Changes of -9.6% to +11.2% are indicated by the $17.44 and $19.39 billion forecasts for the current and future fiscal years.
Last Reported Results & Surprise History
Baidu Inc. reported revenue of $4.57 Billion in the most recent quarter. This is a -7.7% increase year-over-year. The same period saw an EPS of 2.37 versus $2.28 a previous year.
Comparable to the Zacks Consensus Estimate at $4.74 billion the reported revenues surprise by -3.51%. Surprise EPS was +0.85%.
In each of the four preceding quarters, consensus EPS estimates were exceeded by the company. This period saw the company surpass consensus revenue estimates three more times.
Valuation
A stock’s valuation is an important factor in any investment decision. The future performance of a stock’s price will be determined by its current price. This is based on whether it accurately represents the intrinsic value and growth prospects of the underlying business.
Comparing the current valuation multiples of a company, such as price/to-earnings(P/E), and price/to-sales/P/S), with its historical values can help determine if its stock is fair valued, overvalued or undervalued. Additionally, it helps to compare the company relative its peers using these parameters, which gives you a good idea of the reasonability for the stock’s stock price.
The Zacks Style Scores system uses the Zacks Value Style Score to evaluate both traditional and unorthodox valuation metrics. It organizes stocks into five groups, starting with A and ending with F. These scores help identify if a stock’s value is too high, low, rightly valued, and temporary undervalued.
This grade indicates that Baidu Inc. trades at a discount to its peers. Click here to view the values of valuation metrics that drove this grade.
Conclusion
These facts and other Zacks.com information might help you decide if it is worth paying attention to market buzz surrounding Baidu Inc. Its Zacks Rank #3 suggests that it might perform in line with other companies in the near future.
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Baidu, Inc. (BIDU) : Free Stock Analysis Report