Affordable Growth. Analyze the stocks which are showing good growth, decent profitability and health and are not overvalued from a fundamental perspective.


PDD HOLDINGS INC

Nasdaq / Consumer Discretionary / Broadline Retail

Fundamental Rating

8

We assign a fundamental rating of 8 out of 10 to PDD. PDD was compared to 32 industry peers in the Broadline Retail industry. Both the health and profitability get an excellent rating, making PDD a very profitable company, without any liquidiy or solvency issues. 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!



8

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.
Each year in the past 5 years PDD had a positive operating cash flow.

1.2 Ratios

PDD's Return On Assets of 23.19% is amongst the best of the industry. PDD outperforms 100.00% of its industry peers.
PDD has a Return On Equity of 38.87%. This is amongst the best in the industry. PDD outperforms 93.75% of its industry peers.
PDD has a Return On Invested Capital of 31.27%. This is amongst the best in the industry. PDD outperforms 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 11.71%.
The last Return On Invested Capital (31.27%) for PDD is above the 3 year average (17.97%), which is a sign of increasing profitability.
Industry RankSector Rank
ROA 23.19%
ROE 38.87%
ROIC 31.27%
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 better Profit Margin (29.10%) than 100.00% of its industry peers.
The Operating Margin of PDD (28.28%) is better than 100.00% of its industry peers.
PDD has a better Gross Margin (62.06%) than 84.38% of its industry peers.
In the last couple of years the Gross Margin of PDD has declined.
Industry RankSector Rank
OM 28.28%
PM (TTM) 29.1%
GM 62.06%
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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9

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.
PDD has more shares outstanding than it did 5 years ago.
The debt/assets ratio for PDD has been reduced compared to a year ago.

2.2 Solvency

PDD has an Altman-Z score of 5.82. This indicates that PDD is financially healthy and has little risk of bankruptcy at the moment.
Looking at the Altman-Z score, with a value of 5.82, PDD belongs to the top of the industry, outperforming 81.25% of the companies in the same industry.
PDD has a debt to FCF ratio of 0.04. This is a very positive value and a sign of high solvency as it would only need 0.04 years to pay back of all of its debts.
PDD's Debt to FCF ratio of 0.04 is amongst the best of the industry. PDD outperforms 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 RankSector Rank
Debt/Equity 0.02
Debt/FCF 0.04
Altman-Z 5.82
ROIC/WACC4.34
WACC7.2%

2.3 Liquidity

PDD has a Current Ratio of 2.15. This indicates that PDD is financially healthy and has no problem in meeting its short term obligations.
The Current ratio of PDD (2.15) is better than 68.75% of its industry peers.
A Quick Ratio of 2.15 indicates that PDD has no problem at all paying its short term obligations.
PDD's Quick ratio of 2.15 is amongst the best of the industry. PDD outperforms 81.25% of its industry peers.
Industry RankSector Rank
Current Ratio 2.15
Quick Ratio 2.15

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8

3. Growth

3.1 Past

PDD shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 113.90%, which is quite impressive.
Looking at the last year, PDD shows a very strong growth in Revenue. The Revenue has grown by 87.39%.
PDD shows a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 79.96% yearly.
EPS 1Y (TTM)113.9%
EPS 3YN/A
EPS 5YN/A
EPS Q2Q%60.12%
Revenue 1Y (TTM)87.39%
Revenue growth 3Y60.86%
Revenue growth 5Y79.96%
Sales Q2Q%44.33%

3.2 Future

PDD is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 23.38% yearly.
PDD is expected to show a strong growth in Revenue. In the coming years, the Revenue will grow by 27.10% yearly.
EPS Next Y78.39%
EPS Next 2Y43.33%
EPS Next 3Y35.67%
EPS Next 5Y23.38%
Revenue Next Year68.37%
Revenue Next 2Y45.68%
Revenue Next 3Y36.79%
Revenue Next 5Y27.1%

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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9

4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 9.10, which indicates a very decent valuation of PDD.
Based on the Price/Earnings ratio, PDD is valued a bit cheaper than the industry average as 75.00% of the companies are valued more expensively.
PDD is valuated cheaply when we compare the Price/Earnings ratio to 27.73, which is the current average of the S&P500 Index.
With a Price/Forward Earnings ratio of 7.63, the valuation of PDD can be described as very cheap.
Based on the Price/Forward Earnings ratio, PDD is valued cheaply inside the industry as 81.25% of the companies are valued more expensively.
Compared to an average S&P500 Price/Forward Earnings ratio of 22.83, PDD is valued rather cheaply.
Industry RankSector Rank
PE 9.1
Fwd PE 7.63

4.2 Price Multiples

Based on the Enterprise Value to EBITDA ratio, PDD is valued cheaply inside the industry as 84.38% of the companies are valued more expensively.
Based on the Price/Free Cash Flow ratio, PDD is valued cheaper than 81.25% of the companies in the same industry.
Industry RankSector Rank
P/FCF 7.8
EV/EBITDA 4.5

4.3 Compensation for Growth

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.
PDD's earnings are expected to grow with 35.67% in the coming years. This may justify a more expensive valuation.
PEG (NY)0.12
PEG (5Y)N/A
EPS Next 2Y43.33%
EPS Next 3Y35.67%

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0

5. Dividend

5.1 Amount

PDD does not give a dividend.
Industry RankSector Rank
Dividend Yield N/A

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