Assessing Pop Mart (SEHK:9992) Valuation as Labubu Expansion Signals Entertainment Transformation

Pop Mart International Group (SEHK:9992) is ramping up efforts to turn its hit character Labubu into a broader entertainment and content platform. The company is drawing inspiration from leading entertainment brands as it works to expand beyond its art toy roots.

See our latest analysis for Pop Mart International Group.

Pop Mart’s recent high-profile conference appearance and additions to major international indices have helped shine a spotlight on its evolving growth narrative. While the stock’s latest share price sits at HK$254.8, the one-year total shareholder return is a solid 3.6%. After some choppy trading this year, momentum appears to be recovering as new catalysts reshape market sentiment and highlight the company’s potential for long-term value creation.

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With optimism returning and revenue growth outpacing expectations, investors are left wondering if Pop Mart’s shares still have room to run, or if the market has already factored in the company’s ambitious expansion plans.

Price-to-Earnings of 45.7x: Is it justified?

Pop Mart International Group’s shares are trading at a price-to-earnings (P/E) ratio of 45.7x, which is well above peers and signals an expensive valuation relative to recent earnings. With the last close at HK$254.8, investors are paying a premium that exceeds the sector average.

The P/E ratio reflects how much investors are willing to pay for each dollar of company earnings. For a fast-growing consumer brand like Pop Mart, this metric is critical in assessing whether market enthusiasm is running ahead of results. High P/E multiples may be warranted when a company is delivering breakout growth, but they can also be a warning sign if profits do not keep pace with high expectations.

Currently, Pop Mart’s P/E stands above both the peer average of 18.6x and the Hong Kong Specialty Retail industry average of 13.7x. Even compared to an estimated “fair” P/E ratio of 31.7x, the stock remains notably expensive. If the market’s optimism declines or growth falls short, there is room for this multiple to move closer to industry norms.

Explore the SWS fair ratio for Pop Mart International Group

Result: Price-to-Earnings of 45.7x (OVERVALUED)

However, risks remain if earnings growth slows or if investor appetite weakens. This could pressure Pop Mart’s high valuation and recent share price gains.

Find out about the key risks to this Pop Mart International Group narrative.

Another View: Our DCF Model Weighs In

While the price-to-earnings approach suggests Pop Mart is expensive compared to peers, our DCF model presents a different picture. Based on long-term cash flow estimates, the company trades about 10.8% below our DCF fair value of HK$285.68. This may indicate possible undervaluation. Could the market be overlooking future earnings potential?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Pop Mart International Group 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 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.

Build Your Own Pop Mart International Group Narrative

If you have a different take or want to dig further, you can analyse the data and craft your own perspective in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Pop Mart International Group.

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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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