Navigating Li Auto – A Brief Guide for Investors

It hasn't been a great morning session for Li Auto investors, who have watched their shares sink by -3.8% to a price of $29.87. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.

Li Auto Has Attractive P/B and P/E Ratios:

Li Auto Inc., through its subsidiaries, operates in the energy vehicle market 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 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, Li Auto has a trailing 12 month P/E ratio of 19.4 and a P/B ratio of 0.49.

Li Auto's PEG ratio is 45.45, 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.

Wider Gross Margins Than the Industry Average of 14.7%:

2020 2021 2022
Revenue (M) $1,449 $4,238 $6,566
Gross Margins 16% 21% 19%
Net Margins -2% -1% -4%
Net Income (M) -$23 -$50 -$295
Net Interest Expense (M) $10 $29 $91
Depreciation & Amort. (M) $49 $93 $176
Diluted Shares (M) 870 1,853 1,941
Earnings Per Share -$0.03 -$0.03 -$0.15
EPS Growth n/a 0.0% -400.0%
CAPEX (M) $103 $541 $743

Li Auto has rapidly growing revenues and increasing reinvestment in the business, an excellent current ratio of 2.45, and wider gross margins than its peer group. However, the firm has declining EPS growth.

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.