Alibaba (stock ticker symbol: BABA) is a well-known e-commere giant in China. Without distributing any dividends, it is still one of the must-own stocks in the portfoilos of many institutional investors, such as Berkshire and Munger.
After a massacre-like drop in the prices across all listed China Concept Stocks in the 1st quarter of 2022, it is yet to know whether baba has already reached its bottom. However, I would like to use an accounting ratio to measue the relative value of BABA, as compared to its three close competitors in the e-commerce market, namely Amazon (AMZN), Mercado Libre (MELI) and SEA (SE).
For e-commerce operators, price-to-earnings ratio (PE ratio) is an appropriate indicator measuring their profitability by looking into how much earnings each share could create for the company with respect to its market price per share. PE ratio could also be interpreted as the number of years it takes to recover the cost of investment for a potential investor. From the table below, it's obvious to know it takes less than 16 years for recovering the cost of investment in BABA given the current level of earnings and BABA's PE ratio is lowest among four largest e-commerce operators in the world.
Please be reminded that the above commentaries do not constitute or deem to constitute any investment advices or recommendation and investors are advised to exercise caution when making investment decisions.