Alibaba Group Holding Ltd ADR (BABA N) Extended Graph Analysis

April 3rd, 2020 Posted by Extended Analysis No Comment yet

Company Profile

BABA logo

Alibaba Group Holding Ltd Company is a Chinese multinational online company. Specializing in e-commerce, retail, internet and technology. Founded by Jack Ma on 4 April 1999 in Hangzhou, Zhejiang. Alibaba is a public company and traded as NYSE: BABA.

 

Alibaba Group Holding Ltd ADR (BABA N) Extended Graph Analysis

 

1. BABA CASH FLOWS

BABA CASH FLOWS

2015 2016 2017 2018 2019 2020
Net cash provided by operating activities 41,217,000,000 56,836,000,000 80,326,000,000 125,171,000,000 150,975,000,000 196,996,000,000
Net cash used for investing activities -53,454,000,000 -42,831,000,000 -78,364,000,000 -83,890,000,000 -151,060,000,000 -97,828,000,000
Net cash provided by (used for) financing activities 87,497,000,000 -15,846,000,000 32,914,000,000 20,359,000,000 -7,392,000,000 68,605,000,000
Capital expenditures -7,705,000,000 -10,845,000,000 -17,546,000,000 -29,836,000,000 -49,643,000,000 -49,643,000,000
Free cash flow 33,512,000,000 45,991,000,000 62,780,000,000 95,335,000,000 101,332,000,000 147,353,000,000
Working capital 102,437,000,000 82,031,000,000 88,745,000,000 121,045,000,000 62,604,000,000 62,604,000,000

Facts:

  • Cash provided by operating activities was CNY 196.996 billion in 2020.
  • Cash used for investing activities were CNY -97.8 in 2020.
  • Net cash provided by financing activities was CNY 68.605 billion in 2020.
  • Capital expenditure was CNY -49.6 billion in 2020.
  • Free cash flow was CNY 147 billion.
  • Working capital was CNY 62.6 billion in 2020.

Explanation

  • Cash from operations was increasing year-over-year and has a growth rate of 378 percent in five years.
  • Cash from investing activities were purchases of property, plant and equipment, acquisitions and purchases of investments.
  • Cash provided by (used for) financing activities were debt repayment and common stock repurchase.
  • Capital expenditures were purchases of property, plant and equipment and purchases of intangibles.
  • Free cash flow increases year-over-year and has a growth rate of 340% in five years.
  • Working capital was erratic in movement in the last five years.

Interpretation

Alibaba was capable and efficient in maintaining a positive cash from operations, free cash flow and working capital in the last five years. 

 

2. BABA BALANCE SHEET

BABA BALANCE SHEET

2015 2016 2017 2018 2019
Total cash 125,999,000,000 115,696,000,000 150,801,000,000 210,210,000,000 203,165,000,000
Current Assets 142,109,000,000 134,070,000,000 182,516,000,000 256,855,000,000 270,273,000,000
Net property, plant and equipment 12,244,000,000 16,505,000,000 24,897,000,000 75,866,000,000 98,449,000,000
Total non-current assets 113,325,000,000 230,380,000,000 324,296,000,000 460,269,000,000 694,803,000,000
Total assets 255,434,000,000 364,450,000,000 506,812,000,000 717,124,000,000 965,076,000,000
Current liabilities 39,672,000,000 52,039,000,000 93,771,000,000 135,810,000,000 207,669,000,000
Non-current liabilities 70,323,000,000 95,424,000,000 134,242,000,000 215,492,000,000 265,150,000,000
Total liabilities 109,995,000,000 147,463,000,000 228,013,000,000 351,302,000,000 472,819,000,000
Retained earnings 24,842,000,000 78,752,000,000 108,558,000,000 172,353,000,000 257,886,000,000
Stockholders equity 145,439,000,000 216,987,000,000 278,799,000,000 365,822,000,000 492,257,000,000

Facts:

  • Total cash was CNY 203 billion in 2019.
  • Current assets were CNY 270 billion in 2019.
  • Net property, plant and equipment was CNY 98 billion in 2019.
  • Non-current assets were CNY 695 billion in 2019.
  • Total assets were CNY 965 billion in 2019.
  • Current liabilities were CNY 208 billion in 2019.
  • Non-current liabilities were CNY 265 billion in 2019.
  • Total liabilities were CNY 473 billion in 2019.
  • Retained earnings were CNY 258 billion in 2019.
  • Stockholders equity was CNY 492 billion in 2019.

Explanation

  • Cash was increasing year-over-year and has a growth rate of 61% in five years. It represents 21 percent of the total assets.
  • Current assets represent 28 percent of total assets and have a growth rate of 90 percent in five years.
  • Net property plant and equipment represents 10 percent of total assets. It grew 704 percent in five years.
  • Non-current assets was 72 percent of total assets and it grew 513 percent in five years.
  • Total assets grew 278 percent in five years.
  • Current liabilities represent 44 percent of total liabilities.
  • Non-current liabilities represent 56 percent of total liabilities.
  • Total liabilities represents 49 percent of total equities and liabilities.
  • Retained earnings represent 52 percent of total equities.
  • Stockholders equity represents 41 percent of total equities and liabilities.

Interpretation

The balance was strong and in good health. The company was efficient in maintaining a solid balance sheet in the last five years. 

 

3. BABA INCOME AND MARKET

BABA INCOME AND MARKET

2015 2016 2017 2018 2019 2020
Revenue 76,204,000,000 101,143,000,000 158,273,000,000 250,266,000,000 376,844,000,000 488,895,000,000
EBIT 23,637,000,000 29,958,000,000 48,055,000,000 70,363,000,000 57,750,000,000 94,306,000,000
Net Income 24,261,000,000 71,460,000,000 43,675,000,000 64,985,000,000 87,886,000,000 172,126,000,000
EBITDA 39,491,000,000 90,115,000,000 76,992,000,000 125,989,000,000 138,491,000,000 212,655,000,000
Market Capitalization 0 1,356,753,374,878 2,601,380,048,653 2,601,380,048,653 3,231,462,292,833 3,231,462,292,833
Intrinsic Value 0 0 5,454,154,281,120 7,219,369,371,316 13,772,141,627,743 12,164,643,972,274

Facts:

  • Revenue was CNY 489 billion in 2020.
  • EBIT was CNY 94 billion in 2020.
  • Net Income was CNY 172 billion in 2020.
  • EBITDA was CNY 213 billion in 2020.
  • Market capitalization was CNY 3 trillion in trailing twelve months.
  • The calculated intrinsic value was CNY 12 trillion in trailing twelve months.

Explanation:

  • Revenue increases year-over-year and has grown 542 percent in five years.
  • EBIT has a growth of 299 percent in five years.
  • Net income grew 609 percent in five years.
  • Market capitalization increased year-over-year and grew 138 percent in five years.
  • Intrinsic value was over 276 percent against market capitalization, therefore market price was undervalued.

Interpretation

Alibaba was profitable in the last five years. The management was able to generate more than enough revenue for the operation of the business.

 

4. BABA FINANCIAL RATIOS

BABA FINANCIAL RATIOS

2015 2016 2017 2018 2019 2020
Asset turnover (average) 0.42 0.33 0.36 0.4 0.45 0.43
Return on assets % 13.16 23.06 10.03 10.46 10.41 15.37
Return on equity % 27.63 39.43 17.62 19.85 20.42 28.54
Debt/Equity 0.35 0.25 0.28 0.33 0.23 0.16
Return on invested capital % 13.99 11.08 12.13 9.72 9.89 12.16
Interest coverage 12.72 42.86 23.47 29.16 19.54 37.63

Facts:

  • Asset turnover was averaging 0.43 in 2020.
  • Return on assets was 15.37 percent in 2020.
  • Return on equity was 28.54 percent in 2020.
  • Debt/Equity ratio was 0.16 in 2020.
  • Return on invested capital was 12.16 percent in 2020.
  • Interest coverage was 37.63 in 2020.

Explanation

  • Asset turnover indicates that for every $1 in asset, the company generates 0.43 CNY.
  • Return on assets indicates that the company produces .15 CNY of net income for every CNY invested in assets.
  • Return on equity indicates that for every CNY invested in equity, it earns .2854 CNY net income.
  • Debt/Equity ratio indicates that for every CNY in equity, the company has .16 CNY in leverage.
  • Return on invested capital means the company earns .12 CNY profit for its invested capital.
  • Interest coverage means that the company can afford to pay its interest payment 38 times of its current financial obligations.

Interpretation

The financial ratios show that the company is managed very well from its business operations. The company is profitable.

 

5. BABA KEY EXECUTIVE

NAME TITLE
Sophie Minzhi WU Chief Customer Officer
Timothy A. Steinert General counsel and Corporate Secretary
Luyuan Fan Pres, Alibaba Digital Media and Entertainment
J. Michael Evans Director and President
Shan Trudy Dai President Wholesale Marketplaces
Jeff Jianfeng Zhang Chief Technology Officer and President
Junfang Jessie Zheng Chief Risk Officer and Chief Platform Governance Officer
Pen-Hung Chris Tung Chief Marketing Officer
Judy Wenhong Tong Chief People Officer

Facts:

Alibaba does not reveal the key executive compensation.

 

6. BABA LOBBYING AND CONTRIBUTIONS

BABA LOBBYING AND CONTRIBUTIONS

Period USD
2011 100,000
2012 461,000
2013 430,000
2014 450,000
2015 410,000
2016 1,020,000
2017 2,010,000
2018 2,740,000
2019 2,620,000

Facts:

Alibaba has been spending annual lobbying and contributions since 2011. The figures vary  every period. A Note from OpenSecrets is quoted as follows:

NOTE: Figures on this page are calculations by the Center for Responsive Politics based on data from the Senate Office of Public Records. Data for the most recent year was downloaded on January 23, 2020 and includes spending from January 1 – December 31. Prior years include spending from January through December.

Source: OpenSecret.org Center for Responsive Politics

 

7. BABA FINANCIAL STRENGTH

BABA FINANCIAL STRENGTH

DATA CNY
Working capital 62,604,000,000
Total assets 965,076,000,000
Sales 488,895,000,000
EBIT 94,306,000,000
Market value of equity 3,404,603,312,500
Book value of total liabilities 472,819,000,000
Retained earnings 257,886,000,000

CALCULATION

Ratio Score Result
A – Working Capital / Total Assets 0.06 1.2 0.08
B – Retained Earnings / Total Assets 0.27 1.4 0.37
C – EBIT / Total Assets 0.10 3.3 0.32
D – Market Value of Equity / Book Value of Total Liabilities 7.20 0.6 4.32
E – Sales / Total Assets 0.51 1 0.51
Z-Score 5.60


Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Explanation:

Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

Alibaba. has a Z-Score of 5.60. Dr. Altman’s grading scale of 3.0 and above indicates that the company will not declare bankruptcy in near future. In other terms, the company is not close to insolvency. The main factors of this statistical measurement are profitability, liquidity, leverage and efficiency.

Overview

Alibaba Group Holding Ltd ADR has a strong balance sheet and is financially healthy. The income statement shows that the company was profitable and liquid. The stock price of Alibaba was undervalued, therefore, could be a good Buy.

CITATION

https://www.morningstar.com/stocks/xnys/baba/quote

https://www.opensecrets.org/federal-lobbying/clients/summary?cycle=2011&id=D000064488

https://www.alibabagroup.com/en/global/home

Researched and written by Criselda

 

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