introduction
In our previous recommendations dating back to 2022, we suggested a buy on Costco ($COST) at $525.57. As of April 8, 2025, COST is trading at $908.75, representing a Compound Annual Growth Rate (CAGR) of approximately 23.24%, including dividends. We also recommended buys on LSE:GMR (10.35% CAGR), LSE:PBEE (9.31% CAGR), and NASDAQ:ASML (3.75% CAGR). However, we experienced losses on NYSE:O and LSE:ASOS. Given the current market conditions, we are issuing a sell recommendation on Costco, as the stock appears overbought and may face challenges from higher international trading costs.
This brings us to what we believe is one of the most compelling buying opportunities in the market today: BYD Company Limited (BYD).
BYD is a Chinese EV and battery manufacturer. It currently has a mouthwateringly low PEG ratio well below 0 with 5 year estimates as high as 0.7 and year on year as low as 0.25. PEG, which stands for price-to-earnings growth, is a way to value growth companies fairly. A PEG of 1 would suggest it's valued fairly, and lower, but greater than 0 means it's undervalued. So we can gather from that measure that the price should be 1.5 to 4x higher when factoring in future earnings.
Not only is it undervalued on paper but BYD have many bullish headwinds that are likely to push them further:
- Backing of the Chinese government, who have spent the last few decades securing access to important resources and investing in the education of their population
- Dark factories
- The busses they do sell in the USA are assembled in American factories meaning they're already tarrif proof despite the fact the US is not currently a large market for them.
- BYD is at the forefront of battery technology, recently releasing a new battery chemistry which offers better safety, energy density, and charging speeds than standard lithium-ion
- Mass boycotting of Tesla means consumers will be looking for other affordable EVs such as the ones offered by BYD.
- US trade wars, isolationism and instability are causing other countries to look to China as a potential world leader and economic partner. Europe especially might be tempted to lift tariffs on Chinese cars if it means their consumers can get access to affordable personal transport.
- The EU (largest trading bloc in the world) recently agreed to remove tariffs on Chinese cars if they agreed to set minimum prices. This means Chinese EVs will have huge profit margins as money that was previously taken as tariffs by the EU is now taken as profit by Chinese car manufacturers.
Some financials
NOTE: metrics are at the time of writing and aren't updated
Metric Value Market Capitalization $129.82 billion Trailing P/E Ratio 21.47 Forward P/E Ratio 17.12 PEG Ratio (5-year expected) 0.77 Price-to-Sales (P/S) Ratio 1.11 Dividend Yield 0.87% Beta (5-Year Monthly) 1.04 Analyst Rating Strong Buy (97% from 31 analysts)Caveats
- BYD might have a hard time expanding to the us market
- Their domestic market makes up most of their profits. If tariffs damage China, that could mean Chinese people have less cash to spend on cars.
- Make sure to buy the BY6 ticker (Frankfurt stock exchange) or from the Hong Kong exchange as there’s a risk trump could end the ADR scheme for Chinese stocks in the us as part of the ongoing trade war.
Sources
Freetrade
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