Shares of Baidu
Folks are generally pretty stoked about the dot-com darling. Check out these three headlines that crossed the wires just yesterday:
- "Should've Bought Baidu" -- Forbes
- "Why Baidu Is Still a Buy" -- TheStreet.com
- "Baidu: Now a Solid Buy Candidate" -- Seeking Alpha
Normally this would be a good indicator to lace up those contrarian sneakers and sprint the other way. When the euphoria is so thick that three financial sources issue articles where even the headlines scream out that Baidu is worth buying, it's a good time to start worrying -- and selling.
However, the mob rule has it right with Baidu. The shares have been on a tear over the years, but it's still trading at a healthy discount to its growth rate.
Right now, Baidu is trading at 33 times this year's projected profitability and 23 times next year's target. These are high numbers, but did you notice the big drop in earnings multiples between 2012 and 2013? Analysts see earnings growing 56% this year and 41% next year.
If you think that's heady, consider that Baidu grew its bottom line by 88% last year on an 83% spike in revenue.
It's true that Baidu isn't sneaking up on anybody anymore. The company that was often described as "the Google [
Google's market cap is four times greater because of its global reach, but Baidu is already dabbling in a few neighboring markets as it continues to take advantage of China's Internet migration rates and fast-growing economy.
Are there cheaper Internet plays in search? Absolutely. Russia's Yandex
However, Baidu isn't outlandishly priced for a market leader in the world's hottest Internet economy. All of the headlines that manage to get cute by playing off the first syllable of Baidu to arrive at "buy" teasers have it right.
Bullish on Baidu
A bullish call on Baidu has served me well on Motley Fool CAPS over the years. True to the CAPScall initiative, I'm not going to give up on it now. Baidu has soared 1,613% since I recommended it to Rule Breakers newsletter subscribers six years ago, but now it's time to discover the next rule-breaking multibagger. It's a free report. Want it? Get it.