Stock Analysis: Affordable Growth

Fundamental Rating

We assign a fundamental rating of 8 out of 10 to PDD. PDD was compared to 32 industry peers in the Broadline Retail industry. PDD scores excellent points on both the profitability and health parts. This is a solid base for a good stock. PDD is growing strongly while it also seems undervalued. This is an interesting combination These ratings would make PDD suitable for value and growth and quality investing!

1. Profitability

1.1 Basic Checks

In the past year PDD was profitable.

PDD had a positive operating cash flow in the past year.

In multiple years PDD reported negative net income over the last 5 years.

In the past 5 years PDD always reported a positive cash flow from operatings.

1.2 Ratios

PDD's Return On Assets of 22.84% is amongst the best of the industry. PDD outperforms 100.00% of its industry peers.

Looking at the Return On Equity, with a value of 38.91%, PDD belongs to the top of the industry, outperforming 96.88% of the companies in the same industry.

The Return On Invested Capital of PDD (31.76%) is better than 100.00% of its industry peers.

The Average Return On Invested Capital over the past 3 years for PDD is significantly above the industry average of 11.47%.

The 3 year average ROIC (17.97%) for PDD is below the current ROIC(31.76%), indicating increased profibility in the last year.

		Industry Rank	Sector Rank
ROA	22.84%
ROE	38.91%
ROIC	31.76%

ROA(3y)11.61%

ROA(5y)4.23%

ROE(3y)23.06%

ROE(5y)5.8%

ROIC(3y)17.97%

ROIC(5y)N/A

1.3 Margins

PDD has a Profit Margin of 28.93%. This is amongst the best in the industry. PDD outperforms 100.00% of its industry peers.

The Operating Margin of PDD (28.57%) is better than 100.00% of its industry peers.

The Gross Margin of PDD (62.44%) is better than 84.38% of its industry peers.

PDD's Gross Margin has declined in the last couple of years.

		Industry Rank	Sector Rank
OM	28.57%
PM (TTM)	28.93%
GM	62.44%

OM growth 3YN/A

OM growth 5YN/A

PM growth 3YN/A

PM growth 5YN/A

GM growth 3Y-2.34%

GM growth 5Y-4.16%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

PDD has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.

PDD has more shares outstanding than it did 1 year ago.

Compared to 5 years ago, PDD has more shares outstanding

Compared to 1 year ago, PDD has an improved debt to assets ratio.

2.2 Solvency

An Altman-Z score of 6.01 indicates that PDD is not in any danger for bankruptcy at the moment.

With an excellent Altman-Z score value of 6.01, PDD belongs to the best of the industry, outperforming 84.38% of the companies in the same industry.

The Debt to FCF ratio of PDD is 0.04, which is an excellent value as it means it would take PDD, only 0.04 years of fcf income to pay off all of its debts.

PDD has a better Debt to FCF ratio (0.04) than 93.75% of its industry peers.

A Debt/Equity ratio of 0.02 indicates that PDD is not too dependend on debt financing.

With a decent Debt to Equity ratio value of 0.02, PDD is doing good in the industry, outperforming 78.13% of the companies in the same industry.

		Industry Rank	Sector Rank
Debt/Equity	0.02
Debt/FCF	0.04
Altman-Z	6.01

ROIC/WACC4.41

WACC7.2%

2.3 Liquidity

A Current Ratio of 2.11 indicates that PDD has no problem at all paying its short term obligations.

With a decent Current ratio value of 2.11, PDD is doing good in the industry, outperforming 68.75% of the companies in the same industry.

A Quick Ratio of 2.11 indicates that PDD has no problem at all paying its short term obligations.

PDD has a better Quick ratio (2.11) than 81.25% of its industry peers.

		Industry Rank	Sector Rank
Current Ratio	2.11
Quick Ratio	2.11

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 115.49% over the past year.

PDD shows a strong growth in Revenue. In the last year, the Revenue has grown by 89.68%.

The Revenue has been growing by 79.96% on average over the past years. This is a very strong growth!

EPS 1Y (TTM)115.49%

EPS 3YN/A

EPS 5YN/A

EPS Q2Q%65.24%

Revenue 1Y (TTM)89.68%

Revenue growth 3Y60.86%

Revenue growth 5Y79.96%

Sales Q2Q%48.89%

3.2 Future

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.

EPS Next Y85.07%

EPS Next 2Y48.49%

EPS Next 3Y38.56%

EPS Next 5Y30.86%

Revenue Next Year72.37%

Revenue Next 2Y48.54%

Revenue Next 3Y38.29%

Revenue Next 5Y26.32%

3.3 Evolution

The estimated forward Revenue growth is still strong, although it is decreasing when compared to the stronger growth in the past years.

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4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 9.01, which indicates a very decent valuation of PDD.

75.00% of the companies in the same industry are more expensive than PDD, based on the Price/Earnings ratio.

When comparing the Price/Earnings ratio of PDD to the average of the S&P500 Index (29.20), we can say PDD is valued rather cheaply.

PDD is valuated cheaply with a Price/Forward Earnings ratio of 7.09.

Based on the Price/Forward Earnings ratio, PDD is valued cheaply inside the industry as 84.38% of the companies are valued more expensively.

PDD's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 24.00.

		Industry Rank	Sector Rank
PE	9.01
Fwd PE	7.09

4.2 Price Multiples

Based on the Enterprise Value to EBITDA ratio, PDD is valued a bit cheaper than 78.13% of the companies in the same industry.

Compared to the rest of the industry, the Price/Free Cash Flow ratio of PDD indicates a rather cheap valuation: PDD is cheaper than 81.25% of the companies listed in the same industry.