Do Analysts Care About KE (BEKE)’s Elevated Valuation?

KE may be overvalued with poor growth indicators, but the 19 analysts following the company give it an average rating of buy. The analysts have set target prices ranging from $14.97 to $30.95 per share, for an average of $22.3. At today's price of $19.14, KE is trading -14.19% away from its average target price, suggesting there is an analyst consensus of some upside potential.

KE Holdings Inc. is involved in the operation of an integrated online and offline platform for housing transactions and services in the People's Republic of China. The large-cap Real Estate company is headquartered in Beijing, China.

KE does not have a meaningful trailing P/E ratio since its earnings per share are currently in the red. Based on its EPS guidance of 0.64, the company has a forward P/E ratio of 29.9. In comparison, the average P/E ratio for the Real Estate sector is 24.81. On the other hand, the market is undervaluing KE in terms of its net assets because its P/B ratio is 1.947. In comparison, the sector average is 2.24.

So why are analysts giving BEKE a good rating? We believe analysts could be encouraged by the company's impressive 295.4% rate of cash flow growth over the last 5 years. They might also believe KE's positive revenue and margin growth trend will continue.

2018-12-31 2019-12-31 2020-12-31 2021-12-31
Revenue (MM) $28,646 $46,015 $70,481 $80,752
Revenue Growth n/a 60.63% 53.17% 14.57%
Gross Margins 23.98% 24.49% 23.92% 19.59%
Gross Margins Growth n/a 2.13% -2.33% -18.1%
Operating Margins -4.25% -3.88% 4.03% -1.68%
Operating Margins Growth n/a 8.71% 203.87% -141.69%
Earnings Per Share -$0.47 -$2.64 $3.68 -$0.44
EPS Growth n/a -461.7% 239.39% -111.96%
Diluted Shares (MM) 1,001 826 756 1,183
Free Cash Flow (MM) $2,674 -$590 $8,475 $2,165
FCF Growth n/a -122.08% 1535.5% -74.45%
Capital Expenditures (MM) $543 $703 $887 $1,430
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.