Decent Value Stocks. Analyze the stocks with a good fundamental valuation, while still showing decent profitability, health and growth.


ALIBABA GROUP HOLDING-SP ADR

New York Stock Exchange, Inc. / Consumer Discretionary / Broadline Retail

Fundamental Rating

6

We assign a fundamental rating of 6 out of 10 to BABA. BABA was compared to 34 industry peers in the Broadline Retail industry. Both the profitability and the financial health of BABA get a neutral evaluation. Nothing too spectacular is happening here. BABA scores decently on growth, while it is valued quite cheap. This could make an interesting combination. With these ratings, BABA could be worth investigating further for value investing!.



6

1. Profitability

1.1 Basic Checks

BABA had positive earnings in the past year.
In the past year BABA had a positive cash flow from operations.
BABA had positive earnings in each of the past 5 years.
Each year in the past 5 years BABA had a positive operating cash flow.

1.2 Ratios

Looking at the Return On Assets, with a value of 5.49%, BABA is in the better half of the industry, outperforming 66.67% of the companies in the same industry.
The Return On Equity of BABA (9.89%) is better than 60.61% of its industry peers.
BABA's Return On Invested Capital of 6.23% is fine compared to the rest of the industry. BABA outperforms 63.64% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for BABA is significantly below the industry average of 11.22%.
The last Return On Invested Capital (6.23%) for BABA is above the 3 year average (5.01%), which is a sign of increasing profitability.
Industry RankSector Rank
ROA 5.49%
ROE 9.89%
ROIC 6.23%
ROA(3y)5.56%
ROA(5y)7.43%
ROE(3y)9.96%
ROE(5y)13.49%
ROIC(3y)5.01%
ROIC(5y)5.32%

1.3 Margins

BABA has a better Profit Margin (10.78%) than 87.88% of its industry peers.
In the last couple of years the Profit Margin of BABA has declined.
With an excellent Operating Margin value of 13.41%, BABA belongs to the best of the industry, outperforming 90.91% of the companies in the same industry.
In the last couple of years the Operating Margin of BABA has declined.
BABA's Gross Margin of 37.78% is in line compared to the rest of the industry. BABA outperforms 42.42% of its industry peers.
BABA's Gross Margin has declined in the last couple of years.
Industry RankSector Rank
OM 13.41%
PM (TTM) 10.78%
GM 37.78%
OM growth 3Y-13.82%
OM growth 5Y-15.72%
PM growth 3Y-34.19%
PM growth 5Y-20.06%
GM growth 3Y-6.53%
GM growth 5Y-8.53%

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6

2. Health

2.1 Basic Checks

With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), BABA is destroying value.
The number of shares outstanding for BABA has been reduced compared to 1 year ago.
Compared to 5 years ago, BABA has about the same amount of shares outstanding.
BABA has a worse debt/assets ratio than last year.

2.2 Solvency

An Altman-Z score of 2.38 indicates that BABA is not a great score, but indicates only limited risk for bankruptcy at the moment.
The Altman-Z score of BABA (2.38) is better than 63.64% of its industry peers.
The Debt to FCF ratio of BABA is 0.98, which is an excellent value as it means it would take BABA, only 0.98 years of fcf income to pay off all of its debts.
Looking at the Debt to FCF ratio, with a value of 0.98, BABA is in the better half of the industry, outperforming 75.76% of the companies in the same industry.
BABA has a Debt/Equity ratio of 0.14. This is a healthy value indicating a solid balance between debt and equity.
With a decent Debt to Equity ratio value of 0.14, BABA is doing good in the industry, outperforming 63.64% of the companies in the same industry.
Industry RankSector Rank
Debt/Equity 0.14
Debt/FCF 0.98
Altman-Z 2.38
ROIC/WACC0.81
WACC7.74%

2.3 Liquidity

BABA has a Current Ratio of 1.80. This is a normal value and indicates that BABA is financially healthy and should not expect problems in meeting its short term obligations.
BABA's Current ratio of 1.80 is in line compared to the rest of the industry. BABA outperforms 57.58% of its industry peers.
BABA has a Quick Ratio of 1.80. This is a normal value and indicates that BABA is financially healthy and should not expect problems in meeting its short term obligations.
BABA has a Quick ratio of 1.80. This is in the better half of the industry: BABA outperforms 69.70% of its industry peers.
Industry RankSector Rank
Current Ratio 1.8
Quick Ratio 1.8

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5

3. Growth

3.1 Past

BABA shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 20.98%, which is quite impressive.
The Earnings Per Share has been growing by 10.68% on average over the past years. This is quite good.
The Revenue has been growing slightly by 7.28% in the past year.
BABA shows a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 28.26% yearly.
EPS 1Y (TTM)20.98%
EPS 3Y0.95%
EPS 5Y10.68%
EPS growth Q2Q-1.51%
Revenue 1Y (TTM)7.28%
Revenue growth 3Y19.45%
Revenue growth 5Y28.26%
Revenue growth Q2Q5.08%

3.2 Future

BABA is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 7.13% yearly.
Based on estimates for the next years, BABA will show a small growth in Revenue. The Revenue will grow by 7.25% on average per year.
EPS Next Y17.92%
EPS Next 2Y8.87%
EPS Next 3Y10.07%
EPS Next 5Y7.13%
Revenue Next Year8.15%
Revenue Next 2Y8.04%
Revenue Next 3Y7.88%
Revenue Next 5Y7.25%

3.3 Evolution

When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.

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9

4. Valuation

4.1 Price/Earnings Ratio

Based on the Price/Earnings ratio of 7.95, the valuation of BABA can be described as very cheap.
BABA's Price/Earnings ratio is rather cheap when compared to the industry. BABA is cheaper than 87.88% of the companies in the same industry.
When comparing the Price/Earnings ratio of BABA to the average of the S&P500 Index (24.83), we can say BABA is valued rather cheaply.
With a Price/Forward Earnings ratio of 7.70, the valuation of BABA can be described as very cheap.
Compared to the rest of the industry, the Price/Forward Earnings ratio of BABA indicates a rather cheap valuation: BABA is cheaper than 84.85% of the companies listed in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 21.32, BABA is valued rather cheaply.
Industry RankSector Rank
PE 7.95
Fwd PE 7.7

4.2 Price Multiples

BABA's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. BABA is cheaper than 100.00% of the companies in the same industry.
BABA's Price/Free Cash Flow ratio is rather cheap when compared to the industry. BABA is cheaper than 87.88% of the companies in the same industry.
Industry RankSector Rank
P/FCF 7.34
EV/EBITDA 2.55

4.3 Compensation for Growth

The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
The decent profitability rating of BABA may justify a higher PE ratio.
PEG (NY)0.44
PEG (5Y)0.74
EPS Next 2Y8.87%
EPS Next 3Y10.07%

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2

5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 1.31%, BABA has a reasonable but not impressive dividend return.
Compared to an average industry Dividend Yield of 4.21, BABA pays a bit more dividend than its industry peers.
Compared to an average S&P500 Dividend Yield of 2.39, BABA's dividend is way lower than the S&P500 average.
Industry RankSector Rank
Dividend Yield 1.31%

5.2 History

BABA is new to the dividend game and has less than 3 years of track record.
Dividend Growth(5Y)N/A
Div Incr Years0
Div Non Decr Years0

5.3 Sustainability

DPN/A
EPS Next 2Y8.87%
EPS Next 3Y10.07%

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