EHang Holdings (EH): Evaluating Its Worth

EHang Holdings (EH) stock is significantly overvalued compared to its intrinsic value. The company's financial strength is fair, but its profitability and growth are poor. The stock's future return is expected to be lower than its future business growth. Investors should be cautious and consider other options for higher returns with reduced risk.
Nov. 25, 2023 08:14
EHang Holdings (EH): Evaluating Its Worth

EHang Holdings Ltd (NASDAQ:EH) experienced a daily gain of 6.92% despite a 3-month loss of -1.22%. The company reported a Loss Per Share of 0.85. This raises the question of whether the stock is significantly overvalued. In this article, we will provide a comprehensive analysis of EHang Holdings' valuation and encourage readers to explore the subsequent sections for a better understanding.

EHang Holdings is a pioneer in autonomous aerial vehicle (AAV) technology, aiming to make air mobility safe, autonomous, and eco-friendly. The company offers a diverse range of AAV products and solutions for various industries, including passenger transportation, logistics, smart city management, and aerial media. However, despite its promising portfolio, the current stock price of $20.55 per share appears to be significantly overvalued compared to its GF Value of $8.35.

The GF Value is a unique measure of a stock's intrinsic value, derived from historical trading multiples, past performance and growth adjustments, and future business performance estimates. If a stock price surpasses the GF Value Line, it may be considered overvalued, indicating lower future returns. In the case of EHang Holdings, the stock appears to be significantly overvalued with a market cap of $1.20 billion, suggesting lower future returns compared to its future business growth.

Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, it is crucial to analyze the financial strength of a company before making an investment decision. EHang Holdings' cash-to-debt ratio of 0.9 outperforms 53.92% of companies in the Aerospace & Defense industry, indicating fair financial health with an overall financial strength rank of 5 out of 10.

Profitability and growth are important factors in a company's valuation. EHang Holdings has been profitable 0 out of the past 10 years. In the past twelve months, the company reported a revenue of $8 million and a Loss Per Share of $0.85. Its operating margin of -562.41% ranks worse than 97.29% of companies in the Aerospace & Defense industry, indicating poor profitability. Additionally, EHang Holdings' 3-year average revenue growth rate ranks worse than 98.48% of companies in the same industry, and its 3-year average EBITDA growth rate is -58.9%, ranking worse than 93.04% of companies.

Comparing a company's return on invested capital (ROIC) with its weighted cost of capital (WACC) is another way to evaluate its profitability. EHang Holdings' ROIC for the past 12 months was -131.03, while its WACC stood at 11.58. This suggests that the company is not creating value for shareholders.

In conclusion, EHang Holdings' stock appears to be significantly overvalued. The company's financial condition is fair, but its profitability and growth are poor. To learn more about EHang Holdings' stock, you can check out its 30-Year Financials. Please note that this article is not tailored financial advice and is based on historical data and analyst projections. It is important to consider individual investment objectives and financial circumstances before making any investment decisions.

This article first appeared on GuruFocus.