Kandi Technologies Group Inc (NASDAQ:KNDI), a USD$350.67M small-cap, is an auto company operating in an industry whose long product cycles and deep capital outlays make planning ahead difficult. A challenge facing the sector is navigating the path to driverless cars, requiring high capital outlays in technology. Automobile analysts are forecasting for the entire industry, a positive double-digit growth of 12.93% in the upcoming year , and a robust short-term growth of 27.86% over the next couple of years. This rate is more than double the growth rate of the US Below, I will examine the sector growth prospects, and also determine whether Kandi Technologies Group is a laggard or leader relative to its automobile sector peers. See our latest analysis for Kandi Technologies Group
What’s the catalyst for Kandi Technologies Group’s sector growth?
The growing presence in the auto industry of technology firms incontrovertible. In the next decade, software integration will likely have a significant impact on the auto industry, given the alignment of their expertise – they are adept to connecting value-add components to created networks for information, efficiencies and experiences. In the previous year, the industry saw growth in the teens, beating the US market growth of 10.79%. Kandi Technologies Group lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Kandi Technologies Group may be trading cheaper than its peers.
Is Kandi Technologies Group and the sector relatively cheap?
Automobile companies are typically trading at a PE of 14x, lower than the rest of the US stock market PE of 20x. This illustrates a somewhat under-priced sector compared to the rest of the market. Furthermore, the industry returned a higher 17.75% compared to the market’s 10.45%, potentially illustrative of a turnaround. Since Kandi Technologies Group’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Kandi Technologies Group’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Kandi Technologies Group has been an automobile industry laggard in the past year. If your initial investment thesis is around the growth prospects of Kandi Technologies Group, there are other automobile companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Kandi Technologies Group fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If Kandi Technologies Group has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its automobile peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at Kandi Technologies Group’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Kandi Technologies Group’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other automobile stocks instead? Use our free playform to see my list of over 50 other automobile companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.