How the 52% Geely Stock Rally Aligns With Market Hopes for Electric Vehicle Growth

Thinking about what to do with your Geely Automobile Holdings stock? You are not alone. In the past year, the stock price has surged 51.9%, with an impressive 37.6% return year-to-date. Even in just the last week, shares managed a strong 6.3% jump, continuing a positive streak that has grabbed the attention of both longtime investors and newcomers. While the momentum is clear, much of this growth has played out against a backdrop of shifting market sentiment toward electric vehicles and green technology. These trends have positioned Geely as a serious contender.

Of course, whenever a stock appreciates so rapidly, the big question comes up: is it still undervalued, or has the exciting ride already happened? Looking at a value score built on six key valuation checks, Geely tallies a 5, indicating it is considered undervalued in five out of six measures. That is a confidence booster for anyone worried about buying at a peak, but, as always, context matters.

To really answer whether Geely is a buy, hold, or sell at this point, we will need to walk through the major ways analysts assess valuation, from price-to-earnings ratios to cash flow multiples and more. Stay tuned, though, because by the end, we will talk about an even better way to judge a company’s true worth in today’s market.

Geely Automobile Holdings delivered 51.9% returns over the last year. See how this stacks up to the rest of the Auto industry.

Approach 1: Geely Automobile Holdings Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s worth by extrapolating its future cash flow projections and discounting them back to today’s value. This approach gives investors a sense of the business’s intrinsic value, based on its potential to generate cash in the years ahead.

For Geely Automobile Holdings, the latest reported Free Cash Flow (FCF) stands at CN¥5.3 billion. Analysts forecast robust growth, with projected cash flows reaching CN¥33.3 billion by 2027. Looking further ahead, the ten-year projections estimate FCF will top CN¥44.4 billion by 2035. It is important to note projections beyond 2027 are extrapolated using historical growth trends, rather than direct analyst forecasts.

Crunching the numbers, the DCF model assigns Geely an intrinsic fair value of HK$41.42 per share. With the share price currently reflecting a 53.2% discount to this fair value, the model indicates the stock is significantly undervalued by the market.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Geely Automobile Holdings.

Our Discounted Cash Flow (DCF) analysis suggests Geely Automobile Holdings is undervalued by 53.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Geely Automobile Holdings Price vs Earnings

The price-to-earnings (PE) ratio is often the go-to metric for valuing profitable companies, because it directly ties a company’s market value to its earnings power. A lower PE could indicate a bargain, while a higher one might suggest optimism about future growth or lower risk. However, “normal” or “fair” PE ratios are not universal. They can vary depending on how much profit growth is expected and how much risk comes with those prospects.

Geely Automobile Holdings currently trades at 11.9x earnings. This is slightly below the peer average of 12.3x and noticeably lower than the auto industry average of 18.0x. On the surface, this positions Geely as cheaper than most peers and sector rivals, a point worth noting for value-focused investors.

Beyond simple comparisons, Simply Wall St’s “Fair Ratio” presents a more nuanced approach. The Fair Ratio incorporates not just industry averages, but also factors like the company’s specific earnings growth, its profit margins, business risks, and even its size. This means it can offer a more realistic benchmark tailored to Geely’s unique profile, rather than just drawing a broad brush against competitors or the industry.

Currently, Geely’s Fair Ratio stands at 15.6x. With the stock trading at only 11.9x, this signals that Geely is undervalued based on its underlying earnings potential and risk profile, even after accounting for industry and peer performance.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Geely Automobile Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let’s introduce you to Narratives, a smarter and more dynamic way to make investment decisions. A Narrative is simply your own story about how a company like Geely will perform, capturing your expectations for its future revenue, earnings, margins, and ultimately what you think it is worth. Narratives connect your view of the business to a specific financial forecast and a clear fair value, making it easy to see how your beliefs compare to the current share price.

Simply Wall St’s Narratives are easy to create and use, and are available for anyone on the Community page, where millions of investors share, update, and compare their outlooks in real time. By building your Narrative and tracking fair value against the market price, you get a living, adaptable view of when Geely may be a buy or a sell based on your own outlook. As news and earnings come in, Narratives update automatically, letting you respond swiftly to new developments.

For example, one Geely Narrative sees global expansion and new NEV launches pushing a fair value up to HK$42.17. Another, focused on competitive risks and thinner margins, calculates a value as low as HK$20.07.

Do you think there's more to the story for Geely Automobile Holdings? 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.

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