P/E Ratio Insights for Alibaba Group

Benzinga Insights
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Looking into the current session, Alibaba Group Holding Inc. (NYSE: BABA) is trading at $225.82, after a 11.83% drop. Over the past month, the stock fell by 18.34%, but over the past year, it actually spiked by 4.78%. With questionable short-term performance like this, and great long-term performance, long-term shareholders might want to start looking into the company's price-to-earnings ratio.

Assuming that all other factors are held constant, this could present itself as an opportunity for shareholders trying to capitalize on the higher share price. The stock is currently under from its 52 week high by 29.28%.

The P/E ratio is used by long-term shareholders to assess the company’s market performance against aggregate market data, historical earnings, and the industry at large. A lower P/E indicates that shareholders do not expect the stock to perform better in the future, and that the company is probably undervalued. It shows that shareholders are less than willing to pay a high share price, because they do not expect the company to exhibit growth, in terms of future earnings.

View more earnings on BABA

Depending on the particular phase of a business cycle, some industries will perform better than others.

Alibaba Group Holding Inc. has a lower P/E than the aggregate P/E of 42.85 of the Internet & Direct Marketing Retail industry. Ideally, one might believe that the stock might perform worse than its peers, but it’s also probable that the stock is undervalued.

There are many limitations to price to earnings ratio. It is sometimes difficult to determine the nature of the earnings makeup of a company. Shareholders might not get what they're looking for, from trailing earnings.

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© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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