BOSTON (TheStreet Ratings) -- Baidu (BIDU) - Get Report is scheduled to report quarterly earnings after the market close on Monday, and analysts are expecting continued strength in search revenues for the Chinese search giant.

Analysts are expecting Baidu to report a second-quarter profit of 66 cents a share, compared with 35 cents in the year-ago quarter. Revenue is estimated to increase to $502 million from $284 million a year ago, according to a poll of analysts by Thomson Reuters.

While Baidu (which owns 76% of the Chinese search market) is facing increasing competitive pressures, analysts believe that momentum in search revenues will lead to strong second quarter results.

The following is taken from a first-quarter report published by

TheStreet Ratings

, an independent-research unit of

TheStreet

that uses a quantitative model to evaluate stocks.

Baidu reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Baidu increased its bottom line by earning $1.51 versus 63 cents in the prior year. This year, the market expects an improvement in earnings ($2.63 versus $1.51).

We rate Baidu a buy. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Our model has a price target of $197 on Baidu, offering the potential for 28% upside from current levels.

The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Internet Software & Services industry and the overall market, Baidu's return on equity significantly exceeds that of both the industry average and the S&P 500.

>>For upcoming earnings and estimates, see our

Earnings Calendar

.

Baidu's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.29, which clearly demonstrates the ability to cover short-term cash needs.

From a valuation perspective, Baidu's current price-to-earnings ratio indicates a significant premium compared to an average of 41.31 for the Internet Software & Services industry and a significant premium compared to the S&P 500 average of 16.53. For additional comparison, its price-to-book ratio of 36.06 indicates a significant premium versus the S&P 500 average of 2.23 and a significant premium versus the industry average of 8.17. The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium.

Equity research manager Chris Stuart, CFA, joined TheStreet Ratings after working as a senior investment analyst with Merrill Lynch covering small-cap equity and alternative investment strategies. Prior to that, Stuart worked for One Beacon Insurance as an actuarial analyst and at H&R Block as a financial adviser. Stuart earned his bachelor's degree in finance from the University of Massachusetts, Amherst. He holds a Chartered Financial Analyst (CFA) designation and is a member of the Boston Security Analysts Society (BSAS) and the CFA Institute.