Alibaba Group Holding Limited (NYSE:BABA) will increase its dividend from last year’s comparable payment on the 10th of July to CN¥1.98. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

Alibaba Group Holding’s Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company’s dividend is whether the current payout levels are feasible. However, Alibaba Group Holding’s earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 44.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 2.4% by next year, which is in a pretty sustainable range.

Alibaba Group Holding Doesn’t Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2023, the annual payment back then was CN¥7.1, compared to the most recent full-year payment of CN¥7.54. This means that it has been growing its distributions at 3.1% per annum over that time. It’s good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn’t want to depend on this dividend too heavily.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Alibaba Group Holding hasn’t seen much change in its earnings per share over the last five years. While EPS growth is quite low, Alibaba Group Holding has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, it’s great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn’t translated into a consistent payment. The payment isn’t stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 50 Alibaba Group Holding analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

U.S. stock index futures slipped on Tuesday as investors awaited possible negotiations between the United States and its trading partners for more clarity on the tariff war that has roiled financial markets for months.

President Donald Trump and Chinese leader Xi Jinping are set to speak this week, White House press secretary Karoline Leavitt said on Monday, days after Trump accused China of violating an agreement to roll back tariffs and trade restrictions.

Meanwhile, the Trump administration wants countries to provide their best offer on trade negotiations by Wednesday as officials seek to accelerate talks with multiple partners ahead of a self-imposed deadline in just five weeks, according to a draft letter to negotiating partners seen by Reuters.

Trump said last week he planned to double tariffs on imported steel and aluminum to 50% starting on Wednesday, fuelling fresh concerns among investors and impeding global stocks’ march to record highs.

In May, however, a softening of Trump’s harsh trade stance allowed a recovery in risky assets, with the benchmark S&P 500 (.SPX), opens new tab and the tech-heavy Nasdaq (.IXIC), opens new tab posting their biggest monthly percentage gain since November 2023.

As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q1. Today, we are looking at auto parts retailer stocks, starting with Advance Auto Parts (NYSE:AAP).

Cars are complex machines that need maintenance and occasional repairs, and auto parts retailers cater to the professional mechanic as well as the do-it-yourself (DIY) fixer. Work on cars may entail replacing fluids, parts, or accessories, and these stores have the parts and accessories or these jobs. While e-commerce competition presents a risk, these stores have a leg up due to the combination of broad and deep selection as well as expertise provided by sales associates. Another change on the horizon could be the increasing penetration of electric vehicles.

The 5 auto parts retailer stocks we track reported a slower Q1. As a group, revenues beat analysts’ consensus estimates by 1%.

Luckily, auto parts retailer stocks have performed well with share prices up 18.3% on average since the latest earnings results.

Best Q1: Advance Auto Parts (NYSE:AAP)

Founded in Virginia in 1932, Advance Auto Parts (NYSE:AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.

Advance Auto Parts reported revenues of $2.58 billion, down 6.8% year on year. This print exceeded analysts’ expectations by 3.1%. Overall, it was a strong quarter for the company with an impressive beat of analysts’ EPS estimates and full-year EPS guidance exceeding analysts’ expectations.

Advance Auto Parts pulled off the biggest analyst estimates beat and highest full-year guidance raise, but had the slowest revenue growth of the whole group. Unsurprisingly, the stock is up 57.8% since reporting and currently trades at $49.35.

In this article we are going to estimate the intrinsic value of Roblox Corporation (NYSE:RBLX) by estimating the company’s future cash flows and discounting them to their present value. Our analysis will employ the Discounted Cash Flow (DCF) model. Before you think you won’t be able to understand it, just read on! It’s actually much less complex than you’d imagine.

We generally believe that a company’s value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.

10-year free cash flow (FCF) estimate

After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country’s GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.9%) to estimate future growth. In the same way as with the 10-year ‘growth’ period, we discount future cash flows to today’s value, using a cost of equity of 8.5%.

Terminal Value (TV)= FCF₂₀₃₄ × (1 + g) ÷ (r – g) = US$3.7b× (1 + 2.9%) ÷ (8.5%– 2.9%) = US$69b

Present Value of Terminal Value (PVTV)= TV / (1 + r)¹⁰= US$69b÷ ( 1 + 8.5%)¹⁰= US$30b

The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$45b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$87.0, the company appears reasonably expensive at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.

Important Assumptions

The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don’t agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company’s future capital requirements, so it does not give a full picture of a company’s potential performance. Given that we are looking at Roblox as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we’ve used 8.5%, which is based on a levered beta of 1.291. Beta is a measure of a stock’s volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

View our latest analysis for Roblox

SWOT Analysis for Roblox

Strength

• Debt is not viewed as a risk.

Weakness

• Expensive based on P/S ratio and estimated fair value.

Opportunity

• Has sufficient cash runway for more than 3 years based on current free cash flows.

Threat

• Not expected to become profitable over the next 3 years.

Next Steps:

Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Preferably you’d apply different cases and assumptions and see how they would impact the company’s valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price exceeding the intrinsic value? For Roblox, we’ve put together three essential factors you should further research:

1. Risks: Case in point, we’ve spotted 2 warning signs for Roblox you should be aware of.

2. Management:Have insiders been ramping up their shares to take advantage of the market’s sentiment for RBLX’s future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.

3. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!

PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.

MP Materials recently signed a Memorandum of Understanding with the Saudi Arabian Mining Company to develop a rare earth supply chain in Saudi Arabia, aligning with growing global demands. Despite reporting a net loss for the first quarter, the company increased its REO and NdPr production volumes. Additionally, no shares were repurchased in the recent buyback tranche, reflecting existing efforts. Over the past week, the company’s share price rose by 11%, notably outperforming the market’s 2% gain. Enhanced production results and the promising alliance appear to add weight to this recent upward trend amidst broader market growth.

The recent Memorandum of Understanding between MP Materials and the Saudi Arabian Mining Company could significantly influence MP’s growth narrative. By developing a rare earth supply chain in Saudi Arabia, the company stands to expand its reach into ex-China markets, potentially increasing revenue opportunities and enhancing production efficiency. This collaboration may further bolster MP’s position by integrating strategic partnerships, which aligns well with existing efforts to enhance production capacities.

Over the longer term, MP Materials’ total return, including share price and dividends, was 34.34% over the past year. This performance exceeds both the broader market’s return and the US Metals and Mining industry, which had varying results over the same period. While the company’s share price rose by 11% in the past week, outperforming the 2% market gain, its longer-term success underscores its enhanced capabilities in navigating volatile pricing and market demands.

The recent partnership news might positively impact revenue and earnings forecasts, further pushing analyst expectations. Given the increased production capabilities and expanded market access through new agreements, analysts’ anticipated revenue growth of 33.6% per year could see validation. The consensus price target of US$26.69, slightly higher than the current share price of US$24.58, suggests moderate upside potential, indicating that the market views the company’s future prospects with cautious optimism. Nonetheless, the forecasted improvement in margins and earnings growth would be critical in achieving the price target, inviting investors to evaluate their assumptions against these predictions.

While MGM Resorts International (NYSE:MGM) might not have the largest market cap around , it led the NYSE gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today we will analyse the most recent data on MGM Resorts International’s outlook and valuation to see if the opportunity still exists.

What’s The Opportunity In MGM Resorts International?

Good news, investors! MGM Resorts International is still a bargain right now. Our valuation model shows that the intrinsic value for the stock is $50.55, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that MGM Resorts International’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will MGM Resorts International generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for MGM Resorts International. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since MGM is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on MGM for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MGM. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you’d like to know more about MGM Resorts International as a business, it’s important to be aware of any risks it’s facing. At Simply Wall St, we found 2 warning signs for MGM Resorts International and we think they deserve your attention.

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

Today we’re going to take a look at the well-established W.W. Grainger, Inc. (NYSE:GWW). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on W.W. Grainger’s outlook and valuation to see if the opportunity still exists.

What Is W.W. Grainger Worth?

W.W. Grainger appears to be overvalued by 22% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$1,088 on the market compared to our intrinsic value of $892.94. This means that the opportunity to buy W.W. Grainger at a good price has disappeared! But, is there another opportunity to buy low in the future? Since W.W. Grainger’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will W.W. Grainger generate?

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. With profit expected to grow by a double-digit 13% over the next couple of years, the outlook is positive for W.W. Grainger. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

Planet Fitness, Inc. (NYSE:PLNT), is not the largest company out there, but it saw a decent share price growth of 14% on the NYSE over the last few months. The company is inching closer to its yearly highs following the recent share price climb. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today we will analyse the most recent data on Planet Fitness’s outlook and valuation to see if the opportunity still exists.

Is Planet Fitness Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 8.2% below our intrinsic value, which means if you buy Planet Fitness today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $112.02, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Planet Fitness’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 Planet Fitness look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Planet Fitness’ earnings over the next few years are expected to increase by 58%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

The S&P 500 ended a volatile session little changed on Friday as U.S. President Donald Trump slammed China before sounding upbeat about reaching a trade deal, but the benchmark index tallied its biggest monthly increase since November 2023.
The Nasdaq also registered its biggest monthly percentage gain since November 2023.

May was a choppy month for stocks as Trump’s erratic trade policies kept investors on edge, but his softening tariff stance, along with upbeat earnings and tame inflation data, helped the S&P 500 rebound from its April lows.

On Friday, all three major stock indexes opened lower after Trump accused China on his Truth Social platform of breaching a trade agreement with the U.S. and issued a new veiled threat to get tougher with Beijing.

But the market pared losses as Trump said on Friday afternoon he will speak to China’s President Xi Jinping and hopefully work out their differences on trade and tariffs.

Strategists said the constant stream of tariff news is unnerving.

Investors “don’t know how to react to tariff” news at this point, said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma. “The news cycle is maddening.”