Baidu.com, Inc. (ADR) (BIDU), And Three Overlooked Details From Earnings

3. Worries about fraud
Never, at any point, has Baidu done anything to make me think that it has been guilty of fraud. But it’s impossible to ignore the amazingly long list of Chinese companies that have been guilty of it.

Of Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s previous 15 earnings reports, the company had beat expectations 14 of those times. And of those 14 beats, seven had been by $0.02 or less. I’m not saying that that, in and of itself, is a sign of fraud. But earnings statements can easily be massaged to show Wall Street what it wants to see — instead of accurately reflecting what’s going on inside the business.

Now that Baidu has reported two straight earnings misses, I am — paradoxically — more comfortable with the stock in terms of the reliability of its reporting.

What to do now?
Though no one likes to see their company miss expectations or increase spending more than revenue, such concerns ignore the bigger picture. Baidu still has a huge share of the market in China, and with competition from Qihoo 360 Technology Co Ltd (NYSE:QIHU), the time is right to spend the money to solidify the future.

Qihoo 360 Technology Co Ltd (NYSE:QIHU) simply doesn’t have the money to keep up with Baidu without taking on lots of debt. And even if Qihoo 360 Technology Co Ltd (NYSE:QIHU) wasn’t around, it’s smart to invest now. No one knows exactly where the current technological revolution will guide us, but using Google as a proxy, it’s pretty clear that its earlier investments are paying off for shareholders.

For these reasons, Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is one of the three stocks I’m considering adding to my Roth IRA in May. Stay tuned to see if it’s my pick.

The article 3 Overlooked Details From Baidu’s Earnings That Make It a Buy originally appeared on Fool.com and is written by Brian Stoffel.

Fool contributor Brian Stoffel owns shares of Google and Baidu. The Motley Fool recommends Baidu and Google. The Motley Fool owns shares of Baidu and Google.

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