Alibaba Group Holding Limited is a financially healthy and robust stock with a proven track record of outperformance. We all know Alibaba Group Holding, and having this large-cap to cushion your portfolio during a volatile period in the stock market isn’t a bad idea. Today I will give a high-level overview of the stock, and why I believe it’s still attractive.
Alibaba Group Holding Limited, through its subsidiaries, operates as an online and mobile commerce company in the People’s Republic of China and internationally. Started in 1999, and run by CEO Yong Zhang, the company employs 101.55k people and with the stock’s market cap sitting at US$468b, it comes under the large-cap category. Volatility in the market is hardly detrimental to the financial health and business operations of a large, well-established company. Although some monetary and fiscal policy changes may impact some corporate financing decisions and strategy, what we’ve learnt over time is that these companies tend to adapt. And having a strong balance sheet and a history of proven success aids in this adaptability.
Alibaba Group Holding currently has CN¥136b debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. With interest income higher than interest payments, meeting these short-term debt obligations isn’t a problem for Alibaba Group Holding. Moreover, its cash flows from operations copiously covers it debt by 107%, above the safe minimum of 20%. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means BABA is financially robust in the face of a volatile market.
BABA’s profit growth over the previous five years has been positive, with an average annual rate of 17%, outperfoming the market growth rate of 12%. It has also returned an ROE of 11% recently, above the market return of 13%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in Alibaba Group Holding as an investment over the long run.
Next Steps:Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. Alibaba Group Holding tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
- Future Outlook: What are well-informed industry analysts predicting for BABA’s future growth? Take a look at our free research report of analyst consensus for BABA’s outlook.
- Valuation: What is BABA worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BABA is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.