WeRide (WRD) Valuation Check After Recent Short Term Share Price Strength

WeRide (WRD) has been on traders’ radars after a recent uptick in short term returns, with the stock up 2.6% over the past day and 11.3% over the past week.

See our latest analysis for WeRide.

That short term strength sits against a mixed backdrop, with a 30 day share price return of 4.21%, a 90 day share price return decline of 19.95% and a 1 year total shareholder return decline of 28.14%. This suggests that recent momentum is rebuilding from a weaker base.

If WeRide’s latest move has caught your eye, it can be helpful to broaden your view and see how other auto manufacturers are trading through auto manufacturers.

With WeRide posting double digit revenue and net income growth, yet trading about 54% below the average analyst price target, you have to ask: is the stock undervalued, or is the market already pricing in its future growth?

Price-to-Sales of 46.3x: Is it justified?

WeRide last closed at US$9.91, and it trades on a P/S ratio of 46.3x, which is far richer than peers in the Auto Components space.

The P/S ratio compares a company’s market value to its revenue, so a higher multiple usually means investors are paying more for each dollar of sales. For a business like WeRide, which is still loss making, P/S often becomes a primary shorthand for how much future revenue potential the market is willing to pay up for.

Here, the market is assigning a P/S of 46.3x, while the US Auto Components industry average and a peer average sit at 0.8x, a huge gap. An estimated fair P/S ratio of 8.3x is also far below the current level, which suggests a large premium that could compress if sentiment or growth expectations shift.

Explore the SWS fair ratio for WeRide

Result: Price-to-Sales of 46.3x (OVERVALUED)

However, you still need to weigh risks such as ongoing net losses of CN¥1,691.215 and a rich 46.3x P/S multiple if revenue momentum slows.

Find out about the key risks to this WeRide narrative.

Build Your Own WeRide Narrative

If you see the numbers differently or prefer to test your own assumptions, you can build a personalised view in just a few minutes by starting with Do it your way.

A great starting point for your WeRide research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If WeRide is on your watchlist, do not stop there. Broaden your opportunity set and let the data point you toward other potential ideas.

• Spot potential value plays early by scanning these 877 undervalued stocks based on cash flows that may be priced below what their cash flows suggest.
• Ride major technology shifts by checking out these 25 AI penny stocks that are tied to artificial intelligence themes.
• Boost your income focus by reviewing these 11 dividend stocks with yields > 3% that offer yields above 3%.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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