BIDU is on one gargantuan roll. Its stock has soared over 11 fold in less than two years, and its earnings are expected to grow 64% in 2011 (from $1.53 to $2.51) (forward P/E of 57) and 47% in 2012 (from $2.51 to $3.69). Obviously, its growth rate has to slow (it is slated to decrease 1700 basis points in 2012) due to the law of larger numbers, but has this fact been accurately discounted in the current share price?
Probably not, because if you calculate BIDU’s PEG (price earnings to growth) it computes to a lackluster 1.57, using its current trailing P/E of 92 and a very optimistic five year growth rate of 58.47%. Does this growth rate consider the possibilities of Google (GOOG) getting back into the Chinese search fight, an “earth shaking” political event in China, or even something as basic as a misstep in execution?
A
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