Many stateside investors have lost sight of China's leading online companies in recent years, but continuing to overlook them could be a mistake. E-commerce giant Alibaba (BABA 0.93%) reports quarterly results later this week, and there are reasons to be upbeat.

Political and trade war tensions aside, the soil is fertile for a potentially well-received update. Expectations aren't high, but Alibaba has breezed through its recent profit targets. And given the stock's surprisingly low valuation multiples, now could be a good time to reconsider the merits of investing in Alibaba.

Making it count

Shares of Alibaba are roughly the same price that they were a year ago. They are also trading marginally lower year to date, despite a surge in Chinese growth stocks earlier this year and an Alibaba-specific pop that came in late March after management unveiled a plan to restructure the conglomerate into six distinct business units. When Alibaba's leadership team steps up to discuss its fiscal fourth-quarter results before the U.S. markets open on Thursday morning, it will likely spend as much time discussing how the split will play out as it does the quarter's numbers. 

Growth has slowed at Alibaba. Though it has delivered double-digit percentage revenue growth every fiscal year over the past decade, it will likely see that streak officially end on Thursday. Analysts expect to hear that revenue grew by 7% to $30.2 billion in the quarter, which ended March 31. That would leave it with 6% growth for its full fiscal 2023. 

Someone approaching a piggy bank with a hammer behind the back.

Image source: Getty Images.

However, the bottom line in particular bears watching. Analysts are expecting earnings to climb 14% to $1.35 a share. If that's exactly how the performance plays out, Alibaba would currently be trading for a mere 11 times trailing earnings. Compared to the multiples that U.S. tech bellwethers carry, that's a compelling bargain.

In reality, the valuation could even be kinder. Alibaba's headline numbers have routinely landed ahead of where the prognosticators predict. Even over the past year -- in an environment of decelerating top-line growth and global calamity -- Alibaba has trounced the consensus expectations. Lately, it hasn't even been close.

Quarter EPS Estimate EPS Actual Surprise
Q4 2022 $1.09 $1.18 8%
Q1 2023 $1.44 $1.62 13%
Q2 2023 $1.73 $1.92 11%
Q3 2023 $2.36 $2.79 18%

Source: Yahoo! Finance.

Indeed, the beats have been consistent and widening. Alibaba exceeded Wall Street's consensus profit targets by double-digit percentage margins through the first three quarters of its fiscal 2023. 

China took a little longer than most countries to reopen from its period of COVID-19 shutdowns, but as a result, conditions in that market look more attractive now. Many U.S. consumer-facing companies warned in their latest reports of softening consumption trends, but in China, the mood is gradually improving. Alibaba is an obvious beneficiary of the country's bounce in discretionary spending. 

Analysts anticipate a return to double-digit percentage revenue growth in the company's fiscal 2024, with a 10% gain on the top line and a 13% improvement on the bottom line. Alibaba stock enters this trading week just below 10 times forward earnings estimates, and naturally, those projections will get better if Alibaba comes through with another beat and an inspiring near-term outlook. It's not often that you'll find that a top e-commerce stock is also one of the sector's cheapest. Alibaba has a lot to prove, but the upside for its shares could be substantial.