Financial Review: Zhihu (NYSE:ZH) versus Baidu (NASDAQ:BIDU)

Baidu (NASDAQ:BIDU) and Zhihu (NYSE:ZH) are both communication services companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, institutional ownership, valuation, risk and profitability.

Profitability

This table compares Baidu and Zhihu’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Baidu	-2.63%	4.30%	2.64%
Zhihu	-11.33%	-7.71%	-5.75%

Analyst Recommendations

This is a summary of recent recommendations and price targets for Baidu and Zhihu, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Baidu	4	3	15	0	2.50
Zhihu	1	0	0	0	1.00

Baidu currently has a consensus price target of $152.94, indicating a potential upside of 65.47%. Given Baidu’s stronger consensus rating and higher probable upside, research analysts clearly believe Baidu is more favorable than Zhihu.

Volatility and Risk

Baidu has a beta of 0.57, suggesting that its share price is 43% less volatile than the S&P 500. Comparatively, Zhihu has a beta of 0.26, suggesting that its share price is 74% less volatile than the S&P 500.

Earnings and Valuation

This table compares Baidu and Zhihu”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Baidu	$18.46 billion	1.70	$799.00 million	($2.11)	-43.81
Zhihu	$393.10 million	0.77	-$27.58 million	($0.55)	-6.39

Baidu has higher revenue and earnings than Zhihu. Baidu is trading at a lower price-to-earnings ratio than Zhihu, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

28.9% of Zhihu shares are held by institutional investors. 16.7% of Baidu shares are held by insiders. Comparatively, 13.6% of Zhihu shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Baidu beats Zhihu on 11 of the 14 factors compared between the two stocks.

About Baidu

Baidu, Inc. engages in the provision of internet search services in China. It operates through two segments: Baidu Core and iQIYI. The company offers Baidu App to access search, feed, and other services using mobile devices; Baidu Search to access its search and other services; Baidu Feed that provides users with personalized timeline based on their demographics and interests; Baidu Health that helps users to find the doctor and hospital for healthcare needs; and Haokan, a short video app. It also provides Baidu Knows, an online community where users can ask questions to other users; Baidu Wiki; Baidu Experience; Baidu Post; ERNIE Bot, conversational AI bot; Baidu Wenku; Baidu Maps, a voice-enabled mobile app that provides travel-related services; Baidu Drive; Baijiahao; and DuerOS, a smart assistant platform. In addition, it offers online marketing services, which include pay for performance, an auction-based services that allow customers to bid for priority placement of paid sponsored links and reach users who search for information related to their products or services; other marketing services that include display-based marketing services and other online marketing services based on performance criteria other than cost per click; mobile ecosystem, a portfolio of apps, including Baidu App, Haokan, and Baidu Post; various cloud services and solutions, such as platform as a service, software as a service, and infrastructure as a service; self-driving services, including maps, automated valet parking, navigation pilot, electric vehicles, and robotaxi fleets, as well as Xiaodu smart devices. Further, the company provides iQIYI, an online entertainment service, including original and licensed content; other video content and membership; and online advertising services. It has strategic partnership with Zhejiang Geely Holding Group. The company was formerly known as Baidu.com, Inc. Baidu, Inc. was incorporated in 2000 and is headquartered in Beijing, China.

About Zhihu

Zhihu Inc. operates an online content community in the People’s Republic of China. Its community allows people to seek inspiration, find solutions, make decisions, and have fun. The company offers technology, business support, and consulting services; information transmission, software, and information technology services. It also offers information and marketing services; vocational training; and internet services, as well as holds audio-visual permit. Zhihu Inc. was founded in 2010 and is headquartered in Beijing, the People’s Republic of China.