Some of China's biggest dot-com darlings are getting even sweeter.

Shares of Baidu (Nasdaq: BIDU) and (Nasdaq: CTRP) rose yesterday, after Stifel Nicolas initiated coverage with bullish buy ratings.

Singling out China's market leaders in paid search and travel, respectively, Stifel Nicolas analyst George Askew has to know that he's not exactly trolling for bargains in the world's most populous nation.

Judging by his ambitious price targets of $144 for Baidu and $60 for, he doesn't appear to be fazed by the conventionally stiff valuations here. After all, using  Askew's targets would imply fetching 46 times next year's projected profitability and Baidu checking in at 61 times next year's earnings.

Expensive or a vindicated bargain in retrospect?

Betting on Baidu
"Baidu is just getting started," I argued earlier this week.

Sure, the stock's been a 12-bagger since I recommended it to Motley Fool Rule Breakers newsletter subscribers four years ago. At its present valuation, it's unlikely to be a 12-bagger over the next four years for new investors.

However, despite the stiff earnings multiples, it's easy to see Baidu continuing to beat the market by a fair amount.

Askew points out that there are just 272,000 advertisers currently paying to generate leads through Baidu, less than 1% of the 40 million small- and medium-sized businesses that are potentially toiling away in China. As sponsors and consumers flock to China's leading search engine, the double-whammy of more generated leads at higher price points is a slam-dunk.

Baidu CEO Robin Li also offered up an interesting nugget during his stateside presentation at the Web 2.0 Summit this week: Google (Nasdaq: GOOG), Yahoo! (Nasdaq: YHOO), and Microsoft (Nasdaq: MSFT) all tried to buy Baidu before its IPO five summers ago.

Baidu was right to refuse outsider advances given the past five years of spectacular growth. Why bail on the company before the next five years play themselves out? Baidu closed last night at 45 times forward earnings. It seems high, but the stock was fetching 51 times the following year's projected earnings when I originally recommended the stock to Rule Breakers members.

It wasn't expensive. It was a vindicated bargain in retrospect. on A-list is another Chinese dot-com darling that has never seemed cheap at first glance.

When Motley Fool co-founder Tom Gardner recommended China's top travel website to Motley Fool Hidden Gems subscribers five years ago, it also came at a seemingly lofty valuation.

The stiff multiples didn't faze Tom. He wrote that he could see the shares tripling by the end of 2010. He was wrong. has gone on to more than quintuple!

Riding the same wave of growing Internet penetration and a rapidly growing middle class, Ctrip remains the travel site of choice when Web-savvy Chinese users want to book travel plans. has become so ubiquitous that investors flocked to India's MakeMyTrip (Nasdaq: MMYT) earlier this year on the premise that it was India's Ctrip.

Investors could have still doubled their money by going for the cheaper value play in smaller rival eLong (Nasdaq: LONG), but paying a premium for the best proved to be the more financially rewarding choice.

Ctrip wasn't expensive five years ago. It was a vindicated bargain in retrospect.

One more question to Askew
Cynics will argue that sales growth has decelerated at both Baidu and Ctrip. Askew sees Baidu's revenue growing at a 37% clip over the next five years, with Ctrip checking in at a 33% annualized growth rate over the next three years.

These are scalable models, so earnings will likely continue to grow considerably faster than those top-line targets. Stock gains over the next few years may not match the past few years, but it's not inconceivable that I can raise this exact same valuation argument in a few years when both companies handily beat the market and vindicate Askew's ratings.

So I have to ask: Is expensive the new cheap?

Do you think Baidu or Ctrip are good buys at this point? Share your thoughts in the comments box below.

Google and Microsoft are Motley Fool Inside Value picks. Baidu and Google are Motley Fool Rule Breakers recommendations. International is a Motley Fool Hidden Gems selection. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz has only been to China once, but he relishes admiring its dot-com revolution from afar. He does not own shares in any of the stocks in this article. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.