LI AUTO INC - ADR (NASDAQ:LI) - A Potentially Undervalued Player in the EV Space

LI AUTO INC - ADR (NASDAQ:LI) was identified as a decent value stock by our screening process. The company, a Chinese manufacturer of premium smart electric vehicles, shows a combination of reasonable valuation, solid profitability, and healthy growth prospects. Below, we examine why LI might appeal to value-oriented investors.

Valuation

LI’s valuation metrics suggest the stock is priced attractively relative to its industry and broader market:

• P/E Ratio: At 21.78, LI trades below the industry average of 27.79 and the S&P 500’s 27.28.
• Forward P/E: The forward P/E of 10.76 is significantly lower than the industry’s 40.06 and the S&P 500’s 21.76.
• Enterprise Value/EBITDA: LI’s ratio is cheaper than 97% of its peers, reinforcing its undervaluation.
• PEG Ratio: A low PEG ratio indicates the stock is reasonably priced relative to its expected earnings growth.

Profitability

Despite being a relatively young company in a capital-intensive industry, LI demonstrates strong profitability:

• Return on Assets (4.95%) and Return on Equity (11.33%) rank in the top 11% of the automobile sector.
• Operating Margin (4.86%) and Gross Margin (20.53%) outperform most competitors.
• Positive operating cash flow in recent years supports financial stability.

Financial Health

LI maintains a balanced financial structure:

• Debt/Equity Ratio (0.32) is manageable and better than 73% of industry peers.
• Quick Ratio (1.71) and Current Ratio (1.82) indicate sufficient liquidity.
• A slight concern is the Altman-Z score (2.79), which suggests limited but not immediate bankruptcy risk.

Growth Prospects

While past earnings growth has been uneven, future expectations are promising:

• Revenue Growth: Increased by 247.68% on average in recent years, with 15.02% annual growth projected.
• EPS Growth: Expected to rise by 23.06% annually, signaling strong earnings potential.

Our Decent Value screener lists more stocks with similar characteristics. For a deeper dive, review the full fundamental report on LI.

Disclaimer

This is not investment advice. Always conduct your own research before making financial decisions.