Stock Analysis: Affordable Growth

Fundamental Rating

PDD gets a fundamental rating of 8 out of 10. The analysis compared the fundamentals against 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 has both an excellent growth and valuation score. This means it is growing and it is still cheap. This is a rare combination! This makes PDD very considerable for value and growth and quality investing!

1. Profitability

1.1 Basic Checks

PDD had positive earnings in the past year.

In the past year PDD had a positive cash flow from operations.

The reported net income has been mixed in the past 5 years: PDD reported negative net income in multiple years.

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

1.2 Ratios

Looking at the Return On Assets, with a value of 22.84%, PDD belongs to the top of the industry, outperforming 100.00% of the companies in the same industry.

PDD has a Return On Equity of 38.91%. This is amongst the best in the industry. PDD outperforms 96.88% of its industry peers.

Looking at the Return On Invested Capital, with a value of 31.76%, PDD belongs to the top of the industry, outperforming 100.00% of the companies in the same industry.

The Average Return On Invested Capital over the past 3 years for PDD is significantly above the industry average of 11.61%.

The last Return On Invested Capital (31.76%) for PDD is above the 3 year average (17.97%), which is a sign of increasing profitability.

		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's Profit Margin of 28.93% is amongst the best of the industry. PDD outperforms 100.00% of its industry peers.

With an excellent Operating Margin value of 28.57%, PDD belongs to the best of the industry, outperforming 100.00% of the companies in the same industry.

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

In the last couple of years the Gross Margin of PDD has declined.

		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.

The number of shares outstanding for PDD has been increased compared to 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 5.64. This indicates that PDD is financially healthy and has little risk of bankruptcy at the moment.

PDD has a better Altman-Z score (5.64) than 81.25% of its industry peers.

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.

PDD has a Debt/Equity ratio of 0.02. This is a healthy value indicating a solid balance between debt and equity.

PDD has a Debt to Equity ratio of 0.02. This is in the better half of the industry: PDD outperforms 78.13% of its industry peers.

		Industry Rank	Sector Rank
Debt/Equity	0.02
Debt/FCF	0.04
Altman-Z	5.64

ROIC/WACC4.22

WACC7.53%

2.3 Liquidity

PDD has a Current Ratio of 2.11. This indicates that PDD is financially healthy and has no problem in meeting its short term obligations.

Looking at the Current ratio, with a value of 2.11, PDD is in the better half of the industry, outperforming 71.88% 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's Quick ratio of 2.11 is amongst the best of the industry. PDD outperforms 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

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

PDD shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 112.20%, which is quite impressive.

Looking at the last year, PDD shows a very strong growth in Revenue. The Revenue has grown by 106.72%.

Measured over the past years, PDD shows a very strong growth in Revenue. The Revenue has been growing by 79.96% on average per year.

EPS 1Y (TTM)112.2%

EPS 3YN/A

EPS 5YN/A

EPS Q2Q%121.97%

Revenue 1Y (TTM)106.72%

Revenue growth 3Y60.86%

Revenue growth 5Y79.96%

Sales Q2Q%85.65%

3.2 Future

PDD is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 30.86% yearly.

PDD is expected to show a strong growth in Revenue. In the coming years, the Revenue will grow by 26.32% yearly.

EPS Next Y86.66%

EPS Next 2Y49.66%

EPS Next 3Y38.66%

EPS Next 5Y30.86%

Revenue Next Year70.89%

Revenue Next 2Y48%

Revenue Next 3Y37.93%

Revenue Next 5Y26.32%

3.3 Evolution

Although the future Revenue growth is still strong, it is not able to hold up the even more excellent growth rate of the past years.

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4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 9.25, which indicates a very decent valuation of PDD.

PDD's Price/Earnings ratio is a bit cheaper when compared to the industry. PDD is cheaper than 75.00% of the companies in the same industry.

PDD's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 30.52.

The Price/Forward Earnings ratio is 6.50, which indicates a rather cheap valuation of PDD.

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

PDD is valuated cheaply when we compare the Price/Forward Earnings ratio to 21.99, which is the current average of the S&P500 Index.

		Industry Rank	Sector Rank
PE	9.25
Fwd PE	6.5

4.2 Price Multiples

Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of PDD indicates a rather cheap valuation: PDD is cheaper than 87.50% of the companies listed in the same industry.

Based on the Price/Free Cash Flow ratio, PDD is valued cheaply inside the industry as 81.25% of the companies are valued more expensively.