One of Wall Street's biggest winners of the day is Full Truck Alliance Co. Ltd., a digital freight platform whose shares have climbed 14.7% to a price of $8.03 -- 42.72% below its average analyst target price of $14.02. The average analyst rating for the stock is buy. YMM may have outstripped the S&P 500 index by 13.3% so far today, but it has lagged behind the index by 38.5% over the last year, returning -45.3%.
As of the second quarter of 2022, the average Price to Earnings (P/E) ratio for US technology companies is 20.64, and the S&P 500 has an average of 15.97. The P/E ratio consists in the stock's share price divided by its earnings per share (Eps), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
Full truck alliance co. ltd. does not release its trailing 12 month P/E ratio since its earnings per share of $-0.65 are negative over the last year. But we can calculate it ourselves, which gives us a trailing P/E ratio for YMM of -12.3. Based on the company's positive earnings guidance of $0.27, the stock has a forward P/E ratio of 29.7.
In contrast to earnings, gross profit margins are the company's revenue minus the cost of goods only, and don't take into account taxes and overhead. Analyzing gross profit margins as opposed to net (operating) margins gives a better picture of the company's pure profit potential and pricing power in its market, unclouded by other factors. As such, it can provide insights into the company's competitive advantages -- or lack thereof. YMM has gross profit margins of 88.0%, which indicates that it potentially benefits from a sustained competitive advantage over its peers, allowing it to maintain highly profitable pricing structures.
Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts. Full truck alliance co. ltd.'s P/B ratio of 0.3 indicates that the market value of the company is less than the value of its assets -- a potential indicator of an undervalued stock. The average P/B ratio of the Technology sector was 5.39 as of the second quarter of 2022.
It may have an exceptionally low P/B ratio, excellent profit margins, and an analyst consensus of strong upside potential, but its negative P/E ratio mean that Full truck alliance co. ltd. is likely fairly valued at today's prices. We hope you enjoyed this overview of YMM's fundamentals. Before you reach your own decision, be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
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