If you have been grappling with the question of what to do with BYD stock, you are definitely not alone. Over the last few months, BYD has ridden a rollercoaster of headlines and market sentiment. Just look at the numbers: the shares are up 25.6% for the year, and an impressive 159.6% over five years, but more recently, there’s been a bit of sideways movement, with a small dip of 0.5% this past week. Zoom out a little further, and you see a surge in European sales in August, but also sizable roadblocks, like investor skepticism after a $45 billion stock selloff and news of fresh price cuts in Japan.
Despite the short-term jitters, BYD’s long-term strength is hard to ignore. Its recent value score comes in at 4 out of a possible 6, suggesting the company is undervalued on several key metrics. That’s not perfect, but it stands out given the mixed signals investors are wrestling with. Of course, the big question remains: is BYD a smart buy at this level, exhausted by volatility, or quietly poised for another breakout?
To get a clearer picture, we will break down the main approaches to valuing BYD and see how the stock stacks up before revealing an even smarter way to judge whether it might be the right fit for your portfolio.
Why BYD is lagging behind its peers
The Discounted Cash Flow (DCF) model aims to estimate a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s value. For BYD, this approach uses cash flow projections to assess what the business may actually be worth now, based on anticipated performance in the years ahead.
Looking at BYD’s recent financials, the company recorded a last twelve months Free Cash Flow (FCF) of negative CN¥124 million. However, analysts forecast rapid growth for BYD’s cash flow, projecting it will rise to roughly CN¥79.4 billion by the end of 2027. Projections for 2035, extrapolated further, reach nearly CN¥149.4 billion. All of these figures are in Chinese yuan (CN¥).
Based on this two-stage growth model, the DCF calculation suggests a fair value of HK$144.43 per share. This figure is about 25.2% higher than the current share price, which suggests that investors may be undervaluing BYD’s future cash generation potential by a significant margin.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests BYD is undervalued by 25.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Earnings (PE) ratio is widely used for valuing profitable companies, as it measures how much investors are willing to pay for each dollar of a company’s earnings. This multiple is especially useful when the business is generating consistent profits, making it easier to compare valuation across the industry.
When considering what constitutes a “normal” or “fair” PE ratio, two big factors come into play: growth expectations and risk. Companies expected to post faster earnings growth or with lower risk profiles often command higher PE ratios. Those with slower growth or greater uncertainty typically trade at lower multiples.
Right now, BYD trades at a PE ratio of 21.5x. That places it above the auto industry average of 18.2x and significantly above the average for its closest peers at 9.9x. At first glance, this suggests BYD is priced at a premium, possibly due to its scale and growth momentum.
Simply Wall St’s proprietary “Fair Ratio” blends in expectations for BYD’s earnings growth, profitability, industry context, market cap, and unique risks. Instead of using a one-size-fits-all average, this approach customizes the benchmark. For BYD, the Fair Ratio currently sits at 17.7x. This tailored metric provides a clearer sense of what the market might reasonably pay, given BYD’s specific profile.
Comparing the actual PE of 21.5x to the Fair Ratio of 17.7x, BYD shares appear somewhat expensive using this lens. The gap indicates the stock may be overvalued by this measure, suggesting potential investors may want to consider carefully before buying in at current prices.
Result: OVERVALUED
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your perspective or story about a company, connecting your assumptions about BYD’s future revenue, earnings, and profit margins to a concrete fair value estimate. Rather than just rely on static numbers, Narratives let you link what you believe about a company’s direction directly into financial forecasts and create a valuation that’s truly your own.
Narratives are a simple, accessible tool available on Simply Wall St’s Community page and are used by millions of investors to bring context and personal insight to their decisions. They help you decide whether to buy or sell by comparing your calculated Fair Value to the actual share price, while updating automatically whenever new news or company results arrive.
For example, one investor’s upbeat Narrative might assume BYD’s Fair Value is much higher than today’s price, while another, more cautious Narrative sets it below the current market level. Your Narrative gives you the power to act confidently, grounded in your own outlook and the latest information.
Do you think there’s more to the story for BYD? Create your own Narrative to let the Community know!
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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