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10k10q8k

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  • Baidu: Limited Upside, Unlimited Downside [View article]
    I disagree with your valuation method. For the disposal value, we can assume that the company will still grow at a lower, constant rate after the high growth period. The disposal value should be E(beginning year of lower, constant growth)/(r-g) in which g is the lower (compared to the high growth period) constant growth rate. We can safely assume that the company will grow at least at the same rate as the general economy (which would be conservative given it is in a high growth industry in CHINA). Factoring that, the D in your calculations should easily be $150 +. I think it is fair to value BIDU at $190 +.

    Your valuation assumed the company will stop growing after Y5—that is probably wrong.
    Aug 31, 2011. 06:18 PM | Likes Like |Link to Comment
  • Baidu: Limited Upside, Unlimited Downside [View article]
    Disagree with your valuation. Disposal value in your calculation should be E(end of high growth period)/(r-g) in which g is the lower (compared to high growth period) constant growth rate. It is wrong to assume that the company does not grow at all after the high growth period. You can argue that it will grow at the same rate as the general GDP growth, which would be conservative given it is in a high growth industry in CHINA. If you revise your numbers, the disposal value can easily be $150 +.
    Aug 31, 2011. 05:53 PM | Likes Like |Link to Comment
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