Don't overlook NASDAQ:PDD—a stock with solid growth prospects and a reasonable valuation.

Last update: Aug 16, 2024

Consider PDD HOLDINGS INC (NASDAQ:PDD) as an affordable growth stock, identified by our stock screening tool. NASDAQ:PDD is showcasing impressive growth figures and is well-positioned in terms of profitability, solvency, and liquidity. Moreover, it seems to be priced reasonably. Let's dive deeper into the analysis.

Understanding NASDAQ:PDD's Growth Score

Every stock receives a Growth Rating from ChartMill, ranging from 0 to 10. This rating assesses various growth aspects, including historical and projected EPS and revenue growth. NASDAQ:PDD boasts a 8 out of 10:

The Earnings Per Share has grown by an impressive 91.34% over the past year.
Looking at the last year, PDD shows a very strong growth in Revenue. The Revenue has grown by 105.55%.
PDD shows a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 79.96% yearly.
Based on estimates for the next years, PDD will show a very strong growth in Earnings Per Share. The EPS will grow by 30.86% on average per year.
PDD is expected to show a strong growth in Revenue. In the coming years, the Revenue will grow by 26.32% yearly.

Valuation Assessment of NASDAQ:PDD

ChartMill assigns a Valuation Rating to each stock, ranging from 0 to 10. This rating is calculated by analyzing different valuation elements, such as price to earnings and free cash flow, both in absolute terms and relative to the market and industry. In the case of NASDAQ:PDD, the assigned 7 reflects its valuation:

60.61% of the companies in the same industry are more expensive than PDD, based on the Price/Earnings ratio.
PDD is valuated rather cheaply when we compare the Price/Earnings ratio to 29.34, which is the current average of the S&P500 Index.
Based on the Price/Forward Earnings ratio of 9.20, the valuation of PDD can be described as reasonable.
78.79% of the companies in the same industry are more expensive than PDD, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of PDD to the average of the S&P500 Index (20.80), we can say PDD is valued rather cheaply.
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of PDD indicates a somewhat cheap valuation: PDD is cheaper than 60.61% of the companies listed in the same industry.
Based on the Price/Free Cash Flow ratio, PDD is valued a bit cheaper than 69.70% of the companies in the same industry.
PDD's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
PDD has an outstanding profitability rating, which may justify a higher PE ratio.
A more expensive valuation may be justified as PDD's earnings are expected to grow with 44.21% in the coming years.

Deciphering NASDAQ:PDD's Health Rating

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NASDAQ:PDD, the assigned 9 reflects its health status:

An Altman-Z score of 7.81 indicates that PDD is not in any danger for bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 7.81, PDD belongs to the top of the industry, outperforming 93.94% of the companies in the same industry.
PDD has a debt to FCF ratio of 0.05. This is a very positive value and a sign of high solvency as it would only need 0.05 years to pay back of all of its debts.
PDD's Debt to FCF ratio of 0.05 is amongst the best of the industry. PDD outperforms 93.94% of its industry peers.
A Debt/Equity ratio of 0.02 indicates that PDD is not too dependend on debt financing.
PDD has a better Debt to Equity ratio (0.02) than 81.82% of its industry peers.
A Current Ratio of 2.09 indicates that PDD has no problem at all paying its short term obligations.
The Current ratio of PDD (2.09) is better than 75.76% of its industry peers.
PDD has a Quick Ratio of 2.09. This indicates that PDD is financially healthy and has no problem in meeting its short term obligations.
PDD's Quick ratio of 2.09 is amongst the best of the industry. PDD outperforms 84.85% of its industry peers.

How do we evaluate the Profitability for NASDAQ:PDD?

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. NASDAQ:PDD was assigned a score of 8 for profitability:

PDD's Return On Assets of 21.15% is amongst the best of the industry. PDD outperforms 100.00% of its industry peers.
PDD has a better Return On Equity (36.54%) than 90.91% of its industry peers.
The Return On Invested Capital of PDD (29.27%) is better than 100.00% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for PDD is significantly above the industry average of 11.45%.
The 3 year average ROIC (17.97%) for PDD is below the current ROIC(29.27%), indicating increased profibility in the last year.
PDD's Profit Margin of 26.93% is amongst the best of the industry. PDD outperforms 100.00% of its industry peers.
Looking at the Operating Margin, with a value of 26.19%, PDD belongs to the top of the industry, outperforming 100.00% of the companies in the same industry.
PDD's Gross Margin of 61.83% is amongst the best of the industry. PDD outperforms 84.85% of its industry peers.

More Affordable Growth stocks can be found in our Affordable Growth screener.

Our latest full fundamental report of PDD contains the most current fundamental analsysis.

Keep in mind

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.