Guangzhou Automobile Group (SEHK:2238) has seen its stock return over 13% in the past year, catching the attention of investors who are curious about what is driving recent share performance. This is especially notable given mixed longer-term results.
See our latest analysis for Guangzhou Automobile Group.
The recent momentum around Guangzhou Automobile Group has caught investor interest, with a 1-year total shareholder return of 13.2% reflecting optimism about its growth potential, even as short-term share price performance has softened slightly. Broadly, the stock has staged a clear recovery after a challenging multi-year stretch.
If this shift in sentiment has you curious about other opportunities in the space, now is a great moment to discover See the full list for free.
With recent gains and mixed long-term results, the big question is whether Guangzhou Automobile Group’s shares remain undervalued after their rebound, or if the market has already priced in renewed growth expectations. Could this be the right moment to buy?
Guangzhou Automobile Group’s shares are currently trading at a price-to-sales ratio of just 0.3x, which paints the stock as undervalued compared to peers and the broader auto sector. At its last closing price of HK$3.29, the market is valuing its revenues at a significant discount.
The price-to-sales (P/S) ratio compares a company’s market capitalization to its annual revenue. For automakers, this ratio is often used to gauge whether the market is overvaluing or undervaluing sales potential, especially when current earnings are negative or not meaningful.
At 0.3x, Guangzhou Automobile Group stands out as being attractively priced compared to the peer average of 4.5x and the Asian Auto industry average of 1x. Even against an estimated fair P/S ratio of 0.5x, the current level suggests a notable gap that could close if investor sentiment shifts. This low multiple indicates the market may be overlooking potential for future growth or recovery in revenues that the company could deliver.
Explore the SWS fair ratio for Guangzhou Automobile Group
Result: Price-to-Sales of 0.3x (UNDERVALUED)
However, ongoing revenue pressures and recent periods of net losses remain key risks that could limit how quickly optimism around the shares translates into sustained gains.
Find out about the key risks to this Guangzhou Automobile Group narrative.
While the low price-to-sales ratio positions Guangzhou Automobile Group as undervalued, our DCF model offers a very different perspective. According to the SWS DCF model, the shares are actually trading above their estimated fair value. This suggests investors may be taking on more risk to chase a rebound.
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 Guangzhou Automobile Group 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 want to go beyond these models and form your own perspective, you can build a completely custom analysis in just a few short minutes, including your own narrative. Do it your way
A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Guangzhou Automobile Group.
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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 2238.HK.
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