BYD (SEHK:1211) shares have trended upward recently, gaining more than 3% over the past week. Investors are evaluating what is driving this move as the company continues to report steady revenue and net income growth.
See our latest analysis for BYD.
After climbing in the short term, BYD’s share price has remained resilient and steadily positive year-to-date. Its total shareholder returns over the past three and five years have outpaced many sector peers, which indicates that momentum is holding up even as the company navigates an evolving competitive landscape.
If you’re interested in what other automakers have been up to lately, it’s worth checking out the rest of the sector via See the full list for free.
Given this positive trajectory and signs of further upside versus analyst targets, the real question is whether BYD shares remain undervalued at these levels or if the market has already anticipated future growth and left limited room for buyers.
BYD shares are currently trading at a price-to-earnings (P/E) ratio of 22.6x, which is well above the average for both its sector and industry peers. As of the last close at HK$113.9, the market appears to be paying a premium for BYD’s earnings compared to similar companies.
The P/E ratio measures how much investors are willing to pay today for each dollar of earnings generated by the company. High P/E multiples may signal expectations of strong future earnings growth, but they can also suggest that the company is overvalued compared to its peers if the growth profile does not justify it.
In BYD’s case, its P/E of 22.6x is more than twice the peer group average (9.9x) and notably above the Asian auto industry norm (21.6x). The SWS fair value model indicates this is also higher than BYD’s estimated fair P/E ratio of 17.8x, suggesting that the company is valued at a substantial premium not seen in the rest of the sector. This premium could narrow if market expectations adjust to sector trends or if the company’s growth moderates to industry norms.
Explore the SWS fair ratio for BYD
Result: Price-to-Earnings of 22.6x (OVERVALUED)
However, slower earnings growth or shifting market sentiment could quickly reverse current gains and challenge BYD’s premium valuation in coming quarters.
Find out about the key risks to this BYD narrative.
Taking a different approach, the SWS DCF model estimates BYD’s fair value at HK$145.16 per share. This is about 21.5% above its recent price of HK$113.9, suggesting BYD may actually be undervalued. Are market expectations too pessimistic, or is this model missing something?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out BYD for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
If you have your own viewpoint or want to dig deeper into the data, you can craft a personal narrative in just a few minutes, Do it your way.
A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding BYD.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include 1211.HK.
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