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Youku balance sheet analysis - Part 2

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money_3 September 29, 2014 (Chinavestor) This is the last piece of the deep, fundamental Youku Tudou Inc. (NYSE:YOKU) analysis we conducted.We continue with the balance sheet and looked at return on equity (ROE) and return on assets (ROA) ratios, among other profitability measures. ROA/ROE:

YOKU_BaS__ZS_1

Current ROA and ROE are still negative and volatile due to company losses, indicating the generally ineffectiveness of assets and shareholder equity in generating profits. But again, we look forward to see the company’s long-run profit generating potential since its strategic partnership with Alibaba (NYSE:BABA) and large investment in online video library build-up.

Comparison with Major Competitors:

YOKU_BaS__ZS_2

Profitability:

YOKU_BaS__ZS_3

YOKU_BaS__ZS_4

In 2013, Youku Tudou (NYSE:YOKU) is the most aggressive in its revenue-generation. Yet its profitability (Net Margin, ROE, ROA) condition is the worst comparing with its online portal competitors with video services. Youku Tudou (NYSE:YOKU), as a pure online video company, needs to improve its bottom-line performance in order to boost its stock value.

Cash Flows:

Even though with strongest sales growth, FCF of Youku is still negative; FCF/Sales of Youku is worst, leaving little opportunity for the company to enhance its shareholder value. Yet, the company has the highest growth in Operating Cash Flow, indicating the company’s strong growth potential from operations.

Financial Strength Ratios:

Youku Tudou (NYSE:YOKU) maintains high efficiency (high current ratio) and low leverage (debt/equity ratio) comparing with its competitors. This minimizes its financial risk In face of its high business risk (negative net income).



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