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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. This makes BABA very considerable for value investing!



6

1. Profitability

1.1 Basic Checks

BABA had positive earnings in the past year.
BABA had a positive operating cash flow in the past year.
Each year in the past 5 years BABA has been profitable.
In the past 5 years BABA always reported a positive cash flow from operatings.

1.2 Ratios

The Return On Assets of BABA (7.31%) is better than 82.35% of its industry peers.
BABA's Return On Equity of 12.79% is fine compared to the rest of the industry. BABA outperforms 64.71% of its industry peers.
BABA has a Return On Invested Capital of 6.34%. This is in the better half of the industry: BABA outperforms 61.76% of its industry peers.
BABA had an Average Return On Invested Capital over the past 3 years of 5.01%. This is below the industry average of 9.92%.
The last Return On Invested Capital (6.34%) for BABA is above the 3 year average (5.01%), which is a sign of increasing profitability.
Industry RankSector Rank
ROA 7.31%
ROE 12.79%
ROIC 6.34%
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 (14.47%) than 91.18% of its industry peers.
In the last couple of years the Profit Margin of BABA has declined.
The Operating Margin of BABA (14.33%) is better than 88.24% of its industry peers.
BABA's Operating Margin has declined in the last couple of years.
With a Gross Margin value of 37.61%, BABA perfoms like the industry average, outperforming 44.12% of the companies in the same industry.
BABA's Gross Margin has declined in the last couple of years.
Industry RankSector Rank
OM 14.33%
PM (TTM) 14.47%
GM 37.61%
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.
BABA has less shares outstanding than it did 1 year ago.
BABA has about the same amout of shares outstanding than it did 5 years ago.
Compared to 1 year ago, BABA has a worse debt to assets ratio.

2.2 Solvency

An Altman-Z score of 2.51 indicates that BABA is not a great score, but indicates only limited risk for bankruptcy at the moment.
With a decent Altman-Z score value of 2.51, BABA is doing good in the industry, outperforming 64.71% of the companies in the same industry.
The Debt to FCF ratio of BABA is 0.78, which is an excellent value as it means it would take BABA, only 0.78 years of fcf income to pay off all of its debts.
BABA has a Debt to FCF ratio of 0.78. This is in the better half of the industry: BABA outperforms 79.41% of its industry peers.
BABA has a Debt/Equity ratio of 0.15. This is a healthy value indicating a solid balance between debt and equity.
BABA has a better Debt to Equity ratio (0.15) than 61.76% of its industry peers.
Industry RankSector Rank
Debt/Equity 0.15
Debt/FCF 0.78
Altman-Z 2.51
ROIC/WACC0.71
WACC8.98%

2.3 Liquidity

A Current Ratio of 1.94 indicates that BABA should not have too much problems paying its short term obligations.
BABA's Current ratio of 1.94 is fine compared to the rest of the industry. BABA outperforms 61.76% of its industry peers.
BABA has a Quick Ratio of 1.94. This is a normal value and indicates that BABA is financially healthy and should not expect problems in meeting its short term obligations.
Looking at the Quick ratio, with a value of 1.94, BABA is in the better half of the industry, outperforming 73.53% of the companies in the same industry.
Industry RankSector Rank
Current Ratio 1.94
Quick Ratio 1.94

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5

3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 27.42% over the past year.
BABA shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 10.68% yearly.
Looking at the last year, BABA shows a small growth in Revenue. The Revenue has grown by 6.46% in the last 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)27.42%
EPS 3Y0.95%
EPS 5Y10.68%
EPS growth Q2Q20.98%
Revenue 1Y (TTM)6.46%
Revenue growth 3Y19.45%
Revenue growth 5Y28.26%
Revenue growth Q2Q8.5%

3.2 Future

The Earnings Per Share is expected to grow by 7.13% on average over the next years.
The Revenue is expected to grow by 7.25% on average over the next years.
EPS Next Y23.75%
EPS Next 2Y16.07%
EPS Next 3Y13.99%
EPS Next 5Y7.13%
Revenue Next Year9.83%
Revenue Next 2Y9.6%
Revenue Next 3Y9.51%
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.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.

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9

4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 8.21, which indicates a very decent valuation of BABA.
Based on the Price/Earnings ratio, BABA is valued cheaper than 91.18% of the companies in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 24.97, BABA is valued rather cheaply.
A Price/Forward Earnings ratio of 7.03 indicates a rather cheap valuation of BABA.
BABA's Price/Forward Earnings ratio is rather cheap when compared to the industry. BABA is cheaper than 85.29% of the companies in the same industry.
The average S&P500 Price/Forward Earnings ratio is at 20.05. BABA is valued rather cheaply when compared to this.
Industry RankSector Rank
PE 8.21
Fwd PE 7.03

4.2 Price Multiples

94.12% of the companies in the same industry are more expensive than BABA, based on the Enterprise Value to EBITDA ratio.
88.24% of the companies in the same industry are more expensive than BABA, based on the Price/Free Cash Flow ratio.
Industry RankSector Rank
P/FCF 6.17
EV/EBITDA 3.24

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.
A more expensive valuation may be justified as BABA's earnings are expected to grow with 13.99% in the coming years.
PEG (NY)0.35
PEG (5Y)0.77
EPS Next 2Y16.07%
EPS Next 3Y13.99%

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2

5. Dividend

5.1 Amount

BABA has a Yearly Dividend Yield of 1.35%. Purely for dividend investing, there may be better candidates out there.
Compared to an average industry Dividend Yield of 6.66, BABA pays a bit more dividend than its industry peers.
Compared to an average S&P500 Dividend Yield of 2.56, BABA's dividend is way lower than the S&P500 average.
Industry RankSector Rank
Dividend Yield 1.35%

5.2 History

BABA does not have a reliable dividend history as it only pays dividend since a couple or years.
Dividend Growth(5Y)N/A
Div Incr Years0
Div Non Decr Years0

5.3 Sustainability

DPN/A
EPS Next 2Y16.07%
EPS Next 3Y13.99%

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