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Baidu

Nasdaq:BIDU
Snowflake Description

Adequate balance sheet with moderate growth potential.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
BIDU
Nasdaq
$80B
Market Cap
  1. Home
  2. US
  3. Software
2017/12/16
Company description

Baidu, Inc. provides Internet search services in China and internationally. More info.


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3 Month History
BIDU
Industry
5yr Volatility vs Market

Value

 Is Baidu undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Baidu to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Baidu is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Baidu's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Baidu's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Baidu is overvalued based on earnings compared to the US Internet industry average.
  • Baidu is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does Baidu's expected growth come at a high price?
  • Baidu is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Baidu's assets?
  • Baidu is overvalued based on assets compared to the US Internet industry average.
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Value checks
We assess Baidu's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Internet industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Internet industry average (and greater than 0)? (1 check)
  5. Baidu has a total score of 0/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (2.47%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Baidu is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
CN¥93,760

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = CN¥37,036 × (1 + 2.47%) ÷ (10.5% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
CN¥472,457

Present value of terminal value:
CN¥286,747

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
CN¥380,507 = CN¥93,760 + CN¥286,747

Value = Total value / Shares Outstanding (CN¥380,507 / 347)

Discount to Share Price

Value per share (CNY): CN¥1095.85

Exchange rate CNY/USD = 0.151

Value per share (USD): $165.81

Current discount (share price of $233.48): -40.81%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 10.5% = 2.47% + (1.067 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($80,493,731,954).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

1.067 = 0.995 (1 + (1- 35%) (11.05%))

Levered Beta used in calculation = 1.067



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Baidu expected to perform in the next 1 to 3 years based on estimates from 31 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
13.4%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Baidu expected to grow at an attractive rate?
  • Baidu's earnings growth is expected to exceed the low risk savings rate of 4.5%.
Growth vs Market Checks
  • Baidu's earnings growth is expected to exceed the US market average.
  • Baidu's revenue growth is expected to exceed the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Baidu's earnings are expected to grow by 13.4% yearly, however this is not considered high growth (20% yearly).
  • Baidu's revenue is expected to grow by 16.7% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Baidu is not expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be below 20%.

Improvement & Relative to industry
  • Performance (ROE) is expected to be above the current US Internet industry average.
  • A decline in Baidu's performance (ROE) is expected over the next 3 years.
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Future performance checks
We assess Baidu's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Baidu has a total score of 3/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Baidu performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Baidu's growth in the last year to its industry (Internet).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Baidu's year on year earnings growth rate has been positive on average over the past 5 years.
  • Baidu's 1 year earnings growth is negative, it can't be compared to the 5 year average.
  • Baidu's 1 year earnings growth is negative, it can't be compared to the US Internet industry average.
Earnings and Revenue History
Baidu's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Poor return on shareholders funds (ROE < 20%) last year.
  • Baidu performed worse than the US Internet industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has been diminishing over 3 years.
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Past performance checks
We assess Baidu's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Internet industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Baidu has a total score of 1/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Baidu's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Baidu's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Baidu is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Baidu's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of Baidu's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • Low level of unsold assets.
  • Total debt is covered by total short term assets, assets are 2.6x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Baidu's level of debt (52.4% of total debt) compared to net worth is high (greater than 40%).
  • The level of debt compared to net worth has increased over the past 5 years (12.3% vs 52.4% today).
  • Total debt is well covered by annual operating cash flow (37.5%, greater than 20% of total debt).
  • Baidu earns more interest than it pays.
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Financial health checks
We assess Baidu's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Baidu has a total score of 4/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Baidu's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
0%
Current annual income from Baidu dividends.
If you bought $2,000 of Baidu shares you are expected to receive $0 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Not paying a dividend.
  • Not paying a dividend.
Annualized Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Not paying a notable dividend.
  • Not paying a notable dividend.
Current Payout to shareholders
What portion of Baidu's earnings are paid to the shareholders as a dividend.
  • Not paying a notable dividend.
Future Payout to shareholders
  • Insufficient estimate data to determine if a dividend will be paid in 3 years.
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Income/ dividend checks
We assess Baidu's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Baidu afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Baidu has a total score of 0/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Baidu's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Robin Li, image provided by Google.
Robin Li
AGE 48
TENURE AS CEO 13.9 years
CEO Bio

Mr. Robin Li Co-Founded Baidu, Inc. in January 2000 and has been its Chief Executive Officer since January 2004 and oversees its overall strategy and business operations. Mr. Li served as the President of Baidu, Inc. from February 2000 to December 2003. He served as an Engineer of Infoseek from July 1997 to December 1999. He served as Senior Consultant of IDD Information Services from May 1994 to June 1997. He serves as the Chairman of Baidu Venture and Baidu Capital. He has been the Chairman of iQiyi.com Inc., since 2010 and Baidu, Inc. since January 2000. He served as Chairman and Director of Qunar Cayman Islands Limited since June 2012 until January 4, 2016. Mr. Li has been an Independent Director of New Oriental Education and Technology Group since September 6, 2006. He has been a Director of Ctrip.com International Ltd. since October 26, 2015. In 1996, he was awarded a US patent by consolidating web page quality-based sequencing and interrelationship-based sequencing. In 1998, he published a book “Silicon Valley Business War” in Mainland China, based on his own working and living experiences in Silicon Valley. Mr. Li holds a Bachelor of Science Degree in Information Management from Peking University in 1991 and a Master of Science Degree in Computer Science from the State University of New York at Buffalo in 1994.

CEO Compensation
  • No compensation data for Robin.
  • No compensation data for Robin.
Management Team Tenure

Average tenure and age of the Baidu management team in years:

4.9
Average Tenure
48
Average Age
  • The tenure for the Baidu management team is about average.
Management Team

Robin Li

TITLE
Co-Founder
AGE
48
TENURE
13.9 yrs

Qi Lu

TITLE
Vice Chairman
AGE
55
TENURE
0.9 yrs

Ya-Qin Zhang

TITLE
President
AGE
51

Herman Yu

TITLE
Chief Financial Officer
AGE
46
TENURE
0.3 yrs

Lee Liu

TITLE
Vice President of HR & Admin

Sharon Ng

TITLE
Director of Ir

Victor Liang

TITLE
VP, General Counsel & Executive Assistant to CEO
TENURE
6.5 yrs

Hailong Xiang

TITLE
Senior Vice President
AGE
39
TENURE
3.2 yrs

Zhu Guang

TITLE
Senior Vice President
TENURE
1.5 yrs

Tim Yu

TITLE
Chief Executive Officer of Beijing Qiyi Century Science & Technology Co.
AGE
49
TENURE
7.9 yrs
Board of Directors Tenure

Average tenure and age of the Baidu board of directors in years:

7.1
Average Tenure
51.6
Average Age
  • The tenure for the Baidu board of directors is about average.
Board of Directors

Robin Li

TITLE
Co-Founder
AGE
48
TENURE
17.9 yrs

Qi Lu

TITLE
Vice Chairman
AGE
55
TENURE
0.8 yrs

Brent Callinicos

TITLE
Independent Director
AGE
51
TENURE
2.2 yrs

James Ding

TITLE
Independent Director
AGE
52
TENURE
12.3 yrs

Yuanqing Yang

TITLE
Independent Director
AGE
52
TENURE
2.2 yrs
Recent Insider Trading
  • No 3 month insider trading information.
Who owns this company?
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Management checks
We assess Baidu's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Baidu has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

Baidu, Inc. provides Internet search services in China and internationally. It operates through three segments: Search Services, Transaction Services, and IQiyi. It offers Chinese language search platform on its Baidu.com Website that enables users to find relevant information online, including Web pages, news, images, documents, and multimedia files through links provided on its Website; and transaction platform, including Nuomi.com to connect online and offline services provided by third-parties. The company also provides transaction services, such as Baidu Nuomi, Baidu Deliveries, Baidu Mobile Game, Baidu Wallet, Baidu Maps, and others; and iQiyi, an online video platform with a content library that includes licensed movies, television series, cartoons, shows, and other programs. In addition, it offers auction-based pay-for-performance services; online marketing services based on search queries, contextuals, audience attributes, media and placement attributes, and other forms; and consultative services. The company serves online marketing customers, including SMEs, large domestic companies, and Chinese divisions and subsidiaries of multinational companies operating in the retail and ecommerce, local services, medical and healthcare, network service, financial services, education, online games, transportation, construction, business services, and decoration industries. The company was formerly known as Baidu.com, Inc. and changed its name to Baidu, Inc. in December 2008. Baidu, Inc. was founded in 2000 and is headquartered in Beijing, the People’s Republic of China.

Details
Name: Baidu, Inc.
Ticker: BIDU
Exchange: NasdaqGS
Founded: 2000
Market Cap: $80,493,731,954
Shares outstanding: 347,225,140
Website: http://www.baidu.com
Address: Baidu, Inc.
Baidu Campus,
No 10, Shangdi 10th Street,
Beijing,
100085,
China
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NasdaqGS BIDU SPON ADR REP A Nasdaq Global Select US USD 05. Aug 2005
DB B1C SPON ADR REP A Deutsche Boerse AG DE EUR 05. Aug 2005
XTRA B1C SPON ADR REP A XETRA Trading Platform DE EUR 05. Aug 2005
SWX BIDU SPON ADR REP A SIX Swiss Exchange CH CHF 05. Aug 2005
WBAG BIDU SPON ADR REP A Wiener Boerse AG AT EUR 05. Aug 2005
BMV BIDU N SPON ADR REP A Bolsa Mexicana de Valores MX MXN 05. Aug 2005
SGX K3SD SPON ADR REP A Singapore Exchange SG USD 05. Aug 2005
Number of employees
Current staff
Staff numbers
45,887
Baidu employees.
Industry
Industry: Internet Software and Services
Sector: Software