Assessing Alibaba's Stock Valuation (BABA)

Chinese e-commerce giant Alibaba Group Holding Limited (BABA) continues to defy its skeptics. With shares soaring more than 20% just over the past month, BABA shares are no longer in the bargain bin. But does that mean they should be avoided, given the company's strong projected growth rate ? Let's take a look at where the stock trades relative to the rest of the market.

Alibaba shares closed Thursday at $102.57, up 0.24%. The shares have risen some 26% year-to-date, compared with a 6.66% rise in the S&P 500 (SPX) index. The stock is currently priced at a forward P/E ratio of 31, which is about 14 points above the average stock in the S&P 500 index. The P/E is based on fiscal 2016 earnings estimates of $3.29 per share. (See also: Is Alibaba Stock Still a Bargain at 52-Week Highs? )

Based on fiscal 2017 estimates of $4.22 per share, BABA stock is priced at a forward P/E of 24. While that is still seven points above the S&P 500 index, the projected earnings imply growth of 28%. This would be almost six times the S&P's projected growth. In other words, although the stock is pricey, Alibaba is producing value.

Looking ahead, the company is projected to earn 70 cents per share on revenue of $5.13 billion in the quarter that ends September, according to Thomson Reuters. This compares to the year-ago quarter when earnings were $3.63 per share on $5.37 billion in revenue. For the full year, earnings are projected to be $3.29 per share, while full-year revenue is expected to be $22.79 billion.

In its fiscal second quarter, its revenue of $4.84 billion beat Wall Street estimates by $300 million, while earnings per share of 74 cents beat Wall Street estimates by 11 cents. Can the streak continue? The current consensus among 41 analysts rates the stock with a "buy" and a 12-month price target of $110, suggesting 7% premiums from current levels. (See also: Alibaba Stock Rises on Q2 Earnings, Rev Beat.)