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Should You Investigate Pinduoduo Inc. (NASDAQ:PDD) At US$132?

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·3 min read
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Today we're going to take a look at the well-established Pinduoduo Inc. (NASDAQ:PDD). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$203 at one point, and dropping to the lows of US$124. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Pinduoduo's current trading price of US$132 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Pinduoduo’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Pinduoduo

Is Pinduoduo still cheap?

According to my valuation model, Pinduoduo seems to be fairly priced at around 14.59% above my intrinsic value, which means if you buy Pinduoduo today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $115.34, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Pinduoduo’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Pinduoduo look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Pinduoduo, it is expected to deliver a relatively unexciting earnings growth of 3.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Pinduoduo, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in PDD’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on PDD, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 2 warning signs for Pinduoduo and you'll want to know about them.

If you are no longer interested in Pinduoduo, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.