Has GAC Group’s Recent Stock Dip Opened the Door for Opportunity in 2025?

Trying to figure out whether Guangzhou Automobile Group is a stock worth your attention right now? You are not alone. Plenty of investors are weighing up whether recent price moves signal a fresh opportunity or an ongoing challenge. Over the past week, the stock slipped by 0.9%, adding to a 2.6% slide in the last month. Zoom out and the picture gets even more interesting: year to date, the stock is up 1.8%, yet it is still down nearly 12% in the past 12 months and almost 40% over five years. That mix of short-term stability with long-term underperformance may suggest the market is rethinking the company’s outlook or could even be underestimating its potential.

Much of this recent movement lines up with broader shifts in the Chinese automotive sector. Shifting policy support for electric vehicles and changing consumer trends have kept the entire industry on its toes. For Guangzhou Automobile Group, these factors may have contributed to swings in investor sentiment and risk appetite, as the company adapts to compete in an evolving market.

If you are curious about whether the market’s view matches up with the company’s real value, you are in the right place. We have assessed Guangzhou Automobile Group across six classic valuation checks and found that it appears undervalued in three of them, meaning it scores a 3 out of 6. But the story does not end there. Let’s walk through each valuation method, and then explore a smarter approach to understanding what this stock is truly worth.

Why Guangzhou Automobile Group is lagging behind its peers

Approach 1: Guangzhou Automobile Group Dividend Discount Model (DDM) Analysis

The Dividend Discount Model (DDM) values a stock based on the company’s ability to pay and sustainably grow its dividends over time. This model assumes that a company’s worth is intrinsically tied to the cash it returns to shareholders via dividends, factoring in both how much it pays and how much those payouts are expected to grow.

For Guangzhou Automobile Group, the most recent dividend per share is CN¥0.04594, with a payout ratio of 65.05%. The company’s return on equity stands at 3.03%. This results in an expected long-term dividend growth rate of just over 1% annually, based on a standard calculation: (1 minus payout ratio) times return on equity. This relatively low growth outlook suggests modest prospects for dividend increases.

According to the DDM, the intrinsic value for Guangzhou Automobile Group comes in at CN¥0.41 per share. This estimated value is dramatically below the current price, implying that the stock is roughly 704% overvalued by this method. Based strictly on dividend potential and projected growth, the model does not see compelling value in today’s pricing.

Result: OVERVALUED

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

Our Dividend Discount Model (DDM) analysis suggests Guangzhou Automobile Group may be overvalued by 704.4%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Guangzhou Automobile Group Price vs Sales (P/S) Multiple Analysis

For companies like Guangzhou Automobile Group, the Price-to-Sales (P/S) multiple is a helpful valuation tool, especially when earnings fluctuate or profits are minimal. The P/S ratio measures how much investors are willing to pay for each dollar of sales, offering a useful perspective when profit margins vary or bottom-line figures are less stable. Typically, companies with stronger growth prospects and lower risk command a higher multiple, while those facing uncertain growth or volatility trade at a discount to reflect that extra risk.

Currently, Guangzhou Automobile Group’s P/S ratio sits at just 0.30x. This is well below both the industry average of 0.93x and the peer group average of 4.81x. At first glance, this low multiple might suggest the market is discounting the company's prospects or feels wary of future growth. However, raw comparisons like these do not account for important differences in size, profitability, and risk profile among companies.

This is where Simply Wall St's "Fair Ratio" comes in. Unlike a straightforward peer or industry average, the Fair Ratio (0.48x for Guangzhou Automobile Group) adjusts for specific factors such as expected growth, profit margins, the size of the business, and the risks it faces within its sector. This tailored benchmark aims to capture a more realistic, apples-to-apples valuation.

Comparing the Fair Ratio of 0.48x with the current P/S ratio of 0.30x, Guangzhou Automobile Group shares appear to be trading below what would be considered fair value based on its fundamentals and outlook.

Result: UNDERVALUED

PS 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 Guangzhou Automobile Group Narrative

Earlier we mentioned an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is the story behind the numbers. It is your unique perspective on a company’s future, brought to life by connecting a story or thesis with practical forecasts for revenue, margins, and fair value. Rather than just focusing on ratios or historical figures, Narratives help you see how Guangzhou Automobile Group’s journey could play out financially, translating your conviction into a real-world fair value estimate.

Accessible for free on Simply Wall St’s Community page, Narratives are used by millions of investors to track companies as events unfold and new data emerges. With Narratives, you can spot the gaps between what you think the company is worth (Fair Value) and what the market is charging (current Price), making buy or sell decisions more objective and informed. The best part is that Narratives automatically update as soon as fresh news or earnings are released, helping you avoid outdated assumptions.

For example, one investor's Narrative on Guangzhou Automobile Group could assume rapid EV growth and assign a fair value well above today’s price, while another may forecast slow sales and see the stock as still overvalued. All of this is visible at a glance in the Community.

Do you think there's more to the story for Guangzhou Automobile Group? 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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