BYD (SEHK:1211) has quietly climbed about 4% over the past month, even after a weaker patch in the past 3 months, and that kind of divergence tends to catch investor attention.
See our latest analysis for BYD.
That move comes after a choppy few months, with the 90 day share price return still negative, but a solid year to date share price gain and strong multi year total shareholder returns suggesting underlying momentum is still broadly intact as investors balance growth prospects against execution risks.
If BYD has you thinking about where the next opportunities in autos might come from, now is a good time to explore other auto manufacturers that could complement your watchlist.
With double digit earnings growth, a value score at the top end, and a notable discount to analyst targets, the key question is whether BYD is still undervalued or if markets are already pricing in its future growth.
BYD trades on a 21.4x price to earnings multiple against a last close of HK$99.15, which screens as expensive versus peers and the wider auto sector.
The price to earnings ratio compares what investors pay today for each unit of current earnings. It is a key yardstick in capital intensive industries like autos where profitability can be cyclical and margins are often thin.
In BYD’s case, the current 21.4x multiple sits well above the Asian auto industry average of 18.6x and even further above the peer group average of 8.9x. This implies the market is already baking in stronger, more durable earnings than many rivals, even though our fair price to earnings ratio estimate of 14.7x suggests a lower level that valuations could gravitate toward if expectations cool.
Compared to these benchmarks, the premium that investors are paying for each dollar of BYD’s earnings is substantial. The gap to both industry norms and our fair ratio estimate underlines how stretched the valuation looks on this metric alone.
Explore the SWS fair ratio for BYD
Result: Price-to-Earnings of 21.4x (OVERVALUED)
However, slower than expected earnings growth or a prolonged period of de rating in EV valuations could challenge the optimism embedded in BYD’s current multiple.
Find out about the key risks to this BYD narrative.
Our DCF model tells a different story to the rich 21.4x earnings multiple. On this view, BYD looks about 10.8% undervalued versus an estimated fair value of roughly HK$111 a share, raising the question of which signal investors should trust when volatility returns.
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 912 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 see the numbers differently or want to stress test your own thesis using our tools, you can build a bespoke narrative in minutes: Do it your way.
A great starting point for your BYD research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
Do not stop at a single idea. Use the Simply Wall St Screener to uncover focused lists of opportunities that other investors will only notice later.
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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