Apple Inc. (AAPL), Baidu.com, Inc. (ADR) (BIDU), And A Duo Of Investment Ideas For Value Investors

Published on April 30, 2013 at 12:36 am by The Motley Fool in News

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The company boasts an impressive 70% of all paid search dollars in China, positioning itself to receive the bulk of benefits from growth in digital advertising in China over the coming years. Of the 17 analysts covering Baidu.com, Inc. (ADR) (NASDAQ:BIDU) on Yahoo! Finance, the average estimate for per annum EPS growth over the next five years is 25.78%.

But I’ll be far more conservative, estimating free cash flow to grow by 15% in year one and then decelerate each year thereafter for the next ten years:

Year	Growth Rate
1	15%
2	14.6%
3	14.1%
4	13.7%
5	13.3%
6	12.9%
7	12.5%
8	12.1%
9	11.8%
10	11.4%

Using a 10% discount rate and a 3% perpetuity rate for years beyond the 10th year, the fair value of shares with these assumptions is $110.50, meaning shares are trading at a 23% discount to fair value. Keep in mind that my estimates are far more conservative than the projections made by analysts covering the stock.

If not an outright buy, Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is definitely stock to add to your watchlist.

What do you think about these investment ideas? Have they reached value territory?

The article 2 Investment Ideas for Value Investors originally appeared on Fool.com and is written by Daniel Sparks.

Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Apple and Baidu. The Motley Fool owns shares of Apple and Baidu.