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If you are wondering whether BYD is still a smart buy after its big multiyear run, or if the easy money has already been made, you are not alone. That is exactly what this article will unpack.
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Despite some recent choppiness, with the stock down 1.5% over the last week and roughly flat over 30 days, BYD is still up 8.2% year to date and 3.1% over the past year, on top of a hefty 48.4% gain in three years and 49.9% in five.
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These moves have come as BYD cements its position as a global EV and battery heavyweight, ramping exports and expanding its model lineup in key overseas markets. Investors have also been reacting to policy shifts in China and intensifying EV competition, which can quickly change how the market prices BYD’s growth story.
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In our framework, BYD scores just 1 out of 6 on undervaluation checks. That might sound underwhelming until you see how different valuation methods tell very different stories, and why the most useful way to think about fair value, which we will get to at the end, goes beyond a simple scorecard.
BYD scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow model takes estimates of the cash a company can generate in the future and discounts those amounts back to what they are worth today, to arrive at an intrinsic value per share.
For BYD, the model uses a 2 Stage Free Cash Flow to Equity framework in CN¥. The latest twelve months show negative free cash flow of about CN¥29.1 billion, reflecting heavy investment and working capital swings. Analysts then expect free cash flow to turn positive and grow rapidly, with Simply Wall St extrapolating those forecasts so that by 2035 BYD could be generating around CN¥101.3 billion in free cash flow.
After discounting this stream of cash flows back to today, the model arrives at an intrinsic value of roughly HK$111.24 per share. Compared with the current market price, this implies the stock is about 16.3% below this DCF-derived estimate of intrinsic value, indicating a potential valuation gap based on the model’s assumptions.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests BYD is undervalued by 16.3%. Track this in your watchlist or portfolio, or discover 909 more undervalued stocks based on cash flows.
For a profitable company like BYD, the price to earnings ratio is a straightforward way to gauge how much investors are willing to pay today for each dollar of current earnings. In general, stronger and more reliable earnings growth, and lower perceived risk, justify a higher PE multiple, while slower growth or higher uncertainty usually call for a lower, more conservative multiple.
BYD currently trades on a PE of about 20.0x. That is modestly above the Auto industry average of roughly 18.7x, and well above the broader peer group average of around 8.7x, which might initially make the stock look expensive. However, Simply Wall St’s proprietary Fair Ratio model suggests a fair PE of about 14.6x for BYD, after factoring in its earnings growth outlook, profitability, industry, market cap and company specific risks.
This Fair Ratio is more informative than a simple comparison with peers or the industry, because it adjusts for how fast BYD is expected to grow, the quality of its margins and the risk profile investors are taking on. With the current PE of 20.0x sitting meaningfully above the 14.6x Fair Ratio, the shares look somewhat stretched on an earnings multiple basis.
Result: OVERVALUED
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1456 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of BYD’s story with a concrete financial forecast and a clear fair value. A Narrative is your own explanation of how you think BYD will grow, compete and generate profits, translated into numbers such as future revenue, earnings, margins and an assumed fair value per share. On Simply Wall St’s Community page, used by millions of investors, Narratives make this process accessible by guiding you from story, to forecast, to fair value, and then comparing that fair value with the current share price to help you decide whether BYD looks like a buy, hold or sell. Because Narratives update dynamically when new information arrives, such as earnings or major news, your valuation view can evolve in real time. For example, one BYD Narrative might assume very strong global expansion and assign a high fair value, while another, more cautious Narrative might assume slower growth and assign a much lower fair value.
Do you think there’s more to the story for BYD? Head over to our Community to see what others are saying!
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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