BYD Company Limited (SEHK:1211) received a lot of attention from a substantial price movement on the SEHK in the over the last few months, increasing to HK$80.45 at one point, and dropping to the lows of HK$63.25. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether BYD’s current trading price of HK$68.3 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at BYD’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for BYD
What is BYD worth?
The stock is currently trading at HK$68.3 on the share market, which means it is overvalued by 79% compared to my intrinsic value of HK$38.14. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that BYD’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of BYD look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. BYD’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in BYD’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe BYD should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on BYD for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for BYD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.