It's been a great evening session for Li Auto investors, who saw their shares rise 1.4% to a price of $24.56 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
Li Auto Inc., through its subsidiaries, designs, develops, manufactures, and sells new energy vehicles in the People's Republic of China. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, Li Auto has a trailing 12 month P/E ratio of -79.2 and a P/B ratio of 0.5.
P/B ratios are calculated by dividing the company's market value by its equity's book value. Equity refers to all of the company's assets minus its liabilities. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
Li Auto's PEG ratio is 105.97, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
