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• If you’ve been wondering whether Hua Hong Semiconductor is currently a bargain or already fully priced, you’re not alone. Let’s dig into what the numbers and recent market action are telling us.

• Despite impressive long-term results, with a 261.8% return over the past year, the stock has dropped by 7.0% over the last week and is down 15.8% in the past month, suggesting a shift in market sentiment or risk perception.

• Recent news of continued investment in China’s chipmaking ecosystem and growing global demand for semiconductors have kept Hua Hong Semiconductor in the headlines, adding momentum to the long-term narrative. Regulatory discussions around Chinese tech stocks have also contributed to volatility, shaping how investors are thinking about future opportunities and risks.

• Based on our value checks, Hua Hong Semiconductor currently scores 1 out of 6 for undervaluation, which might raise an eyebrow or two. We’ll explore different valuation approaches next, but I’ll also hint at a more insightful angle on valuation that you won’t want to miss at the end.

Hua Hong Semiconductor scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

The Discounted Cash Flow (DCF) model projects future cash flows for Hua Hong Semiconductor and discounts them back to today’s value, aiming to estimate what the business is intrinsically worth. This approach uses forward-looking cash flow estimates as the primary driver for valuation.

As of the latest data, Hua Hong’s last twelve months of Free Cash Flow stood at negative $1,027 Million. Analysts estimate that in five years, annual Free Cash Flow will turn positive, reaching up to $702 Million by 2029. Looking out to 2035, model-based projections anticipate Free Cash Flow could climb to more than $2.4 Billion. These longer-range numbers are extrapolations and are less certain than the analyst consensus for the earlier years.

Using this two-stage cash flow projection, the DCF model calculates an estimated intrinsic value of $59.85 per share. Compared with the current share price, the analysis reveals the stock is roughly 21.2% above its fair value. This indicates that investors are paying a premium based on these projections.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Hua Hong Semiconductor may be overvalued by 21.2%. Discover 926 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Hua Hong Semiconductor.

The Price-to-Sales (P/S) multiple is often favored for valuing companies that may not show consistent profitability but have meaningful revenues and long-term growth potential. For Hua Hong Semiconductor, this makes P/S the preferred metric, as it allows us to focus on its sales base rather than fluctuating earnings.

It’s important to remember that what constitutes a “normal” or “fair” P/S ratio depends greatly on growth expectations and perceived risks. Companies growing faster or commanding higher margins often trade with higher P/S multiples, while those facing more risk or slower expansion typically command lower ratios.

Currently, Hua Hong Semiconductor trades at a P/S multiple of 7.10x. This is significantly higher than the Semiconductor industry average of 1.87x and the peer group average of 22.93x. To determine what multiple would be “just right” for Hua Hong given its unique combination of growth outlook, profit margin, risk factors, and market position, we can use the proprietary “Fair Ratio” developed by Simply Wall St. For Hua Hong, this Fair Ratio is 4.84x.

The Fair Ratio offers a far more tailored benchmark than simply comparing to industry or peers, as it weighs in company-specific attributes that typically get ignored including differences in growth trajectory, profitability, competitive position, and risk profile. This holistic view delivers a more accurate reading of underlying value.

Comparing Hua Hong’s actual P/S multiple (7.10x) to its Fair Ratio (4.84x), the stock appears overvalued using this approach.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple but powerful idea: you connect your story or perspective about a company, how you believe its business will perform, what will drive its growth, and what risks it faces, to your own financial forecast and an estimated fair value. Narratives let you move from just looking at numbers to understanding the deeper reasons behind them, putting your investment beliefs front and center.

On Simply Wall St’s Community page, Narratives are available for all users and provide a unique, accessible tool that millions of investors use to clarify their thinking and confidently track their investment decisions. With Narratives, you can see in real time how your assumptions impact a company’s fair value and compare that directly to the current price, helping you decide if it is time to buy or sell.

Best of all, Narratives update automatically when new data, news, or earnings come in. For example, some investors project that Hua Hong Semiconductor’s fair value is as high as HK$73.83 due to strong demand in artificial intelligence, while more cautious perspectives see it as low as HK$22.38 due to competitive pressures and uncertainty. Narratives empower you to invest based on your unique view and adjust quickly as the facts change.

Do you think there’s more to the story for Hua Hong Semiconductor? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include 1347.HK.

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