Should You Buy the “Other” Google Inc (GOOG)?

Another player Baidu has to watch out for is Qihoo 360 Technology Co Ltd (NYSE:QIHU), which has been rapidly eating up market share in China and now has around 10% of the Chinese market. It only launched in August 2012, and already is one of the biggest search engines in China.

Qihoo 360 Technology Co Ltd (NYSE:QIHU) also has the advantage of being a native company to China. It will be able to respond to consumer wants easier than Google and will have similar connections to the government as Baidu. Since Qihoo released its new search engine, its stock has gone from $15 to more than $30 per share.

In the long run, Qihoo 360 Technology Co Ltd (NYSE:QIHU) will benefit from the growing amount of Internet users who will both use their search engine and buy their internet security software. Internet security is the base of Qihoo’s business model, and the company was doing alright before the search engine release.

Qihoo is priced for strong growth. so I would look for a pullback before buying in unless you are extremely bullish. With a forward PE of 18, if it hits those estimates then Qihoo will be relatively cheap for a growth stock.

Google, which is slated to grow its EPS by 17.5% this year and 14.5% over the next few years, trades at a PE of 23.8. That is a significant premium to Baidu, even though Baidu is growing faster than Google Inc (NASDAQ:GOOG). This leads me to believe Baidu is undervalued.

Final thoughts

Baidu has a lot going for it; it has a solid balance sheet, is growing very fast in a fast-growing market with a long runway, trades at a cheap PE relative to the market and to its peers, and is trading by its 52-week low. Baidu will at least hold or continue to gain market share in China, as it keeps taking away searches from Google.

China’s government doesn’t like Google Inc (NASDAQ:GOOG), and wants to keep Google out of its country. This protectionism will benefit Baidu, providing it a shield most companies don’t get to wield. I’m bullish on Baidu.

Callum Turcan has a position in Baidu. The Motley Fool recommends Baidu and Google. The Motley Fool owns shares of Baidu and Google.