Question

Can you do a comparable valuation for alibaba? Use the easiest ratios you can and make it less than 3 minutes

Answer 1

The comparable valuation of Alibaba is done as follows

The three most commonly used valuation ratios are used in order to value the compare the financials and arrive at a relative valuation

1. EV/SALES

2. EV/EBITDA

3. P/E or the price earnings ratio

The Market data collected inc;udes

	Market data
Company	Price	M.Cap	Enterprise Value $
Alibaba	294	43652	7130
Tencent Holdings	557	20452	1660

The LTP of the share

The Market Cap

And the Enterprise value which includes = Market cap +debt – cash

The Financial data includes

Financial data
Sales	EBITDA	Earnings
2589	905	2012
321	405	1254

Sales

EBITDA

And Earnings data of the company

Now we calculate the valuation ratios as :

EV/SALES = total EV / total sales

EV/EBITDA= EV / EBITDA data

PE ratio = price of share / eps

=Price of share / ( Total earnings/(M.cap / Price of share ))

	Market data	Financial data	Valuation Ratios
Company	Price	M.Cap	Enterprise Value $	Sales	EBITDA	Earnings	EV/SALES	EV/EBITDA	P/E
Alibaba	294	43652	7130	2589	905	2012	2.754	7.878	21.696
Tencent Holdings	557	20452	1660	321	405	1254	5.171	4.099	16.309
Average							3.963	5.989	19.003

· So from the data we can see that

· p/e ratio of alibaba is higher than the comparable company and also I to the average industry standards

· The EV/sales or the enterprise value to sales of Alibaba is higher than that of Tencent corp, hence the company is costly in terms of its enterprise value to sales ratio

· EV/EBITDA of alibaba is also higher than the industry standards , however it is considered healthy as it is below the acceptance standards of 10.

Thanks