EHang Holdings Ltd (EH, Financial) experienced a daily loss of -3.45% and a 3-month gain of 66.61%. However, with a Loss Per Share of 0.85, questions arise regarding its valuation. This article aims to delve into the financial health and intrinsic value of EHang Holdings to determine if it is indeed significantly overvalued.
Company Overview
EHang Holdings Ltd is a pioneer in the Urban Air Mobility industry, specializing in autonomous aerial vehicle (AAV) technology. It offers AAV products and commercial solutions, including passenger transportation, logistics, smart city management, and aerial media solutions. Despite its innovative offerings, the stock appears to be significantly overvalued when comparing its current price of $17.62 per share to the GF Value of $8.45.
Understanding GF Value
The GF Value is a proprietary measure that estimates a stock's intrinsic value. It is based on historical trading multiples, a GuruFocus adjustment factor related to past performance and growth, and future business performance estimates. A stock price that significantly exceeds the GF Value Line is considered overvalued, implying a potentially poor future return. Conversely, a price significantly below the GF Value Line suggests a higher future return.
Based on the GF Value, EHang Holdings' current market cap of $1.10 billion indicates that it is significantly overvalued. Therefore, the long-term return of its stock is likely to be much lower than its future business growth.
Financial Strength
Before investing in a company, it is crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. EHang Holdings' cash-to-debt ratio of 0.9 ranks better than 54.86% of 288 companies in the Aerospace & Defense industry. However, its overall financial strength is 4 out of 10, indicating a poor financial condition.
Profitability and Growth
Profitability is a key factor in assessing a company's investment potential. EHang Holdings has not been profitable over the past 10 years, with an operating margin of -562.41%, ranking worse than 96.45% of 282 companies in the Aerospace & Defense industry. Its overall profitability rank is 1 out of 10, indicating poor profitability.
Growth is another critical factor in company valuation. EHang Holdings' 3-year average annual revenue growth is -42%, ranking worse than 97.69% of 260 companies in the same industry. Its 3-year average EBITDA growth rate is -58.9%, also ranking poorly among its peers.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. If the ROIC exceeds the WACC, the company is creating value for shareholders. EHang Holdings' ROIC for the past 12 months is -131.03, while its WACC is 11.18, suggesting a lack of value creation.
Conclusion
In conclusion, EHang Holdings' stock appears to be significantly overvalued. With poor financial strength, profitability, and growth, the company's long-term return may not align with its future business growth. To learn more about EHang Holdings, you can check out its 30-Year Financials here.
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