ERPV, EGRPV, Deserved P/E & P/E Quality Weight Ratio : PDD Case Study
Subject : ERPV, EGRPV, Deserved P/E & P/E Quality Weight Ratio : PDD Case Study
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Injecting ROA into EPV (Bruce Greenwald, CTAC Based), I introduce :
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(Valuation A)
Deserved P/E (Formulated just for ROA & CTAC)
= Geometric Mean of PE•ROA Valuation Framework & P/E•1/CTAC_Ratio Valuation Framework’s Deserved PEs
= Geometric Mean of ROA & 1/CTAC_Ratio
= √( ROA/CTAC_Ratio )
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ERPV
= Earnings Return Power Value
= EPS × Deserved P/E
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P/E Quality Weight Ratio
= Market Quoted P/E ÷ Deserved P/E
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(Valuation B)
If Gnet_income is Positive, we could also inject it into the formula.
Gnet_income must be paired with CTAC in the injection:
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Deserved P/E (Formulated just for Positive Gnet_income, ROA & CTAC)
= Geometric Mean of Gnet_income & ROA pairing with 1/CTAC_Ratio respectively
= ( Gnet_income × 1/CTAC_Ratio × ROA × 1/CTAC_Ratio )^(1÷4)
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EGRPV
= Earnings Growth Return Power Value
= EPS × Deserved P/E
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P/E Quality Weight Ratio
= Market Quoted P/E ÷ Deserved P/E
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CTAC Factor
= Clean Total Assets Cost Factor
= 30Y Government Bond Yield Factor × ( 1 + Total Liabilities/Total Equity × (1 + 2 × 30Y Government Bond Yield Ratio) ) ÷ (1 + Total Liabilities/Total Equity)
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CTAC Ratio
= CTAC Factor - 1
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CTAC
= 100 × CTAC Ratio
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2 × 30Y Government Bond Yield Ratio
— Bank (Lender) Loan are trying to gain as high loan rate as possible, 2 × 30Y Government Bond Yield Ratio would be the ceiling; prime rate is set as the same as 30Y Government Bond Yield and the Spread should not more than 30Y Government Bond Yield.
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Significance:
(1÷CTAC Ratio) is assessed by the Risk Management standpoints (the magnitude of Bond Yield (proxy to Inflation) and D/E in CTAC, as a fair valuation standard across all industries. The higher the CTAC, the lower the Deserved P/E.
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ROA is assessed by the Competitive Moat Advantage standpoint. The higher the ROA, the higher the Deserved P/E.
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EPS is assessed by the Company’s Per Unit Earning Value standpoints (the magnitude of Revenue and NPM), as a fair valuation standard across all industries. The higher the Revenue and NPM, the higher the Unit Earning Value, EPS.
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Remark :
Both ERPV & EGRPV are the Upgrades to EPV (Bruce Greenwald, CTAC Based).
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Case Study
PDD
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Non-Gaap EPS
= (99,364,469+7,936,971)÷6.9931÷(5,929,576÷4)
= USD 10.3507581966
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Non-Gaap ROA
= 100×(99,364,469+7,936,971)÷630,044,327
= 17.0307763123
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Total Liabilities/Total Equity
= 215,137,241÷414,907,086
= 0.5185190812
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CTAC Factor
= Clean Total Assets Cost Factor
= 30Y Government Bond Yield Factor × ( 1 + Total Liabilities/Total Equity × (1 + 2 × 30Y Government Bond Yield Ratio) ) ÷ (1 + Total Liabilities/Total Equity)
= 1.04982×(1+0.5185190812×(1+0.04982×2))÷(1+0.5185190812)
= 1.0855384867
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CTAC Ratio
= CTAC Factor - 1
= 1.0855384867 - 1
= 0.0855384867
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CTAC
= 100 × CTAC Ratio
= 100 × 0.0855384867
= 8.55384867
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(Valuation A)
Deserved P/E
= √( ROA/CTAC_Ratio )
= √(17.0307763123/0.0855384867)
= 14.1103062917
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ERPV
= Earnings Return Power Value
= Non-Gaap EPS × Deserved P/E
= 10.3507581966 × 14.1103062917
= USD 146.0523685054
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P/E Quality Weight Ratio
= Market Quoted P/E ÷ Deserved P/E
= (100.17÷10.3507581966) ÷ 14.1103062917
= 9.6775519336 ÷ 14.1103062917
= 0.685849884
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(Valuation B )
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Random Forward Prediction for FY2026 :
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Estimated NTM Non-Gaap EPS
= 10.3507581966 × 1.16
= 12.0068795081
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Estimated NTM Gnet_income = 16 %
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The compound annual growth rate of PDD Holdings Inc's net income for the next 3 years is 16%.
https://www.alphaspread.com/security/nasdaq/pdd/analyst-estimates
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Estimated NTM ROA = same = 17.0307763123
Estimated NTM CTAC = same = 8.55384867
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(Valuation B1)
Estimated NTM Deserved P/E FY2026
= √( 100 × ROA/CTAC )
= √( 100 × 17.0307763123/8.55384867 )
= 13.2423434726
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Estimated NTM ERPV FY2026
= Earnings Return Power Value
= Estimated NTM Non-Gaap EPS × Estimated NTM Deserved P/E
= 12.0068795081 × 13.2423434726
= USD 158.9992224804
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Estimated Forward P/E Quality Weight Ratio FY2026
= Forward Market Quoted P/E ÷ Estimated NTM Deserved P/E
= (100.17÷12.0068795081) ÷ 13.2423434726
= 8.3427171841 ÷ 13.2423434726
= 0.6525031908
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(Valuation B2)
Estimated NTM Deserved P/E FY2026
= ( Gnet_income × 1/CTAC_Ratio × ROA × 1/CTAC_Ratio )^(1÷4)
= ( 16 × (1÷0.0855384867) × 17.0307763123 × (1÷0.0855384867) )^(1÷4)
= 13.8917777169
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Estimated NTM EGRPV FY2026
= Earnings Growth Return Power Value
= Estimated NTM Non-Gaap EPS × Estimated NTM Deserved P/E
= 12.0068795081×13.8917777169
= USD 166.7969012001
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Estimated Forward P/E Quality Weight Ratio FY2026
= Forward Market Quoted P/E ÷ Estimated NTM Deserved P/E
= (100.17÷12.0068795081) ÷ 13.8917777169
= 8.3427171841 ÷ 13.8917777169
= 0.6005507253