This article focuses on whether the stock price of PDD Holdings is high or low. Since the beginning of this year, the stock price of PDD Holdings has more than doubled, leading the growth among similar companies. The discussion on this issue is becoming increasingly intense, and we take this opportunity to analyze it in detail.
As followers of the value investment concept, we will focus our attention on the fundamentals of company operations. That is to say, aside from factors such as external environment, can a company truly bring sustainable profits and cash flow to investors?
In the Q3 2020 financial report, excluding stock-based incentives and non-cash expenses represented by equity-based income, the non-US GAAP profit turned losses into gains, with a profit of 0.47 billion yuan for the period.
Although there is considerable controversy over non-US Generally Accepted Accounting Principles, both Buffett and Munger firmly oppose excluding stock-based incentive expenses from the income statement, believing it would beautify the financial condition of the company. We hold this attitude, but since this approach mainly reflects the absorption of cash flow in the income statement during the operation of the enterprise, it does not prevent us from determining the quality of the company's operation issues based on this.
In the past three years, pdd holdings has mostly been in a loss situation under non-US Generally Accepted Accounting Principles, especially in 2019 when the losses intensified with the increase of billions in subsidies. In addition, affected by the epidemic, this indicator was also at its peak of losses in Q1 2020.
In Q3 2020, this figure suddenly turned positive, which surprised us a bit. Why could pdd holdings rapidly improve in this area in the post-epidemic era?
With the above questions in mind, we focus on examining the quality of revenue...