Question

Can you explain why the current PE ratio for Alibaba is the best for the market? Do you think its undervalued compared to amazon ? Please give detailed reasons

Answer 1

Current price to earning ratio of Alibaba is just 28 whereas when we are comparing it with Amazon price to earning ratio, which is almost in the range of 125.

The price to earning ratio of Alibaba is best for the market because Alibaba and Amazon are almost clocking similar growth but Alibaba is trading at a discount in comparison to Amazon because of its origin being in China and there is an additional risk of being a Chinese company so Alibaba is not getting that premium valuation like Amazon and it is offering a better chance for the market participants in order to maximize their rate of return by investing into a undervalued share in compared to the peers because this company is also clocking the same rate of growth as Amazon.

And I think that someone who is not highly sceptical about investment into a Chinese company can look for Alibaba as a suitable investment for the longer Run because if the market starts to discount it as Amazon, then there is a possibility of a very high upside and it can run up like Tesla.

Yes, it is undervalued in comparison to Amazon as the price to earning ratio is much lower than Amazon and it is having a significant discount in respect to Amazon.