Is Kandi Technologies Group, Inc. (NASDAQGS:KNDI) Overvalued at 63.03x EV/EBITDA?

in INVESTING IDEAS by

Kandi Technologies Group, Inc. (NASDAQGS:KNDI) is currently trading at $7.28, at approximately 41.8% of its 52-week high of $17.40. With the stock price up 34.8% in the last year, investors are worried that the company is getting too expensive. So, is Kandi Technologies Group, Inc. overvalued? In this article, we’ll discuss Kandi Technologies Group, Inc.’s valuation using different valuation models.

Historical Valuation

One of the quickest ways to spot if a company is getting too expensive is to compare the current valuation to its historical one. We can use the price to sales ratio to cut the noise and avoid the volatility of the company’s earnings.

Considering Kandi Technologies Group, Inc.’s latest twelve months revenue/share of $2.19 and using the company’s 5-year average price to sales of 2.24x as a benchmark, we have a fair value of $4.89, which is -32.8% lower than the current price.

With no surprise, we can see that Kandi Technologies Group, Inc.’s price to sales of 3.3x is much higher than its 5-year average of 2.2x, indicating that the company is probably trading in overbought territory. We can easily visualize trends in the company’s fundamentals using the Finbox chart editor, as depicted below.

Source: Finbox Chart Engine

Absolute Valuation: Kandi Technologies Group, Inc. DCF Analysis

Using a company’s historical valuation as a benchmark could lead to misleading results if a change in its fundamentals justifies the current valuation. So it’s always preferable to take into account the latest financial forecast and analyze the company with an absolute valuation model.

So, let’s analyze Kandi Technologies Group, Inc. with a 5Y DCF analysis (EBITDA exit method). Using the latest 5Y revenue forecast CAGR of 13.0%, an average EBITDA margin forecast of 10.8%, a discount rate of 10.5%, and a terminal EBITDA multiple of 22.3x, we get a fair value of $13.4.

So, Is Kandi Technologies Group, Inc. Overvalued?

Relying only on one or two financial models to determine a company’s fair value is never a good idea. It’s always preferable to use different models before coming to hasty conclusions.

The Finbox Fair Value Estimate is an advanced financial modeling technology that uses eleven different models to estimate the fair value of a stock and lets you get a company’s fair value at your fingertips. All the models are based on the same data utilized by the biggest investment banks and money managers in the world.

According to the estimate, Kandi Technologies Group, Inc.’s fair value is $5.53, representing a -24.1% downside from the current price. Below are the fair value estimates for each model.

Source: Finbox Fair Value Estimates

Company’s Profile: Kandi Technologies Group, Inc.

Kandi Technologies Group, Inc., through its subsidiaries, designs, develops, manufactures, and commercializes electric vehicle (EV) products and parts and off-road vehicles in the People’s Republic of China and internationally.

It offers off-road vehicles, including go-karts, all-terrain vehicles, utility vehicles, and other vehicles for sale to distributors or consumers; and EV parts comprising battery packs, EV drive motors, EV controllers, air conditioners, and other electric products, as well as electric scooters and electric self-balancing scooters.

Kandi Technologies Group, Inc. has a strategic cooperation agreement with Jiangsu Jinpeng Group Ltd. to jointly develop the EV market in China. The company was formerly known as Kandi Technologies, Corp. and changed its name to Kandi Technologies Group, Inc. in December 2012. Kandi Technologies Group, Inc. was founded in 2002 and is headquartered in Jinhua, the People’s Republic of China.- VIEW LESS

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.