Assessing Horizon Robotics (SEHK:9660) Valuation As Share Repurchase Program Gets Underway

Share repurchase launch puts Horizon Robotics in focus

Horizon Robotics (SEHK:9660) has begun repurchasing shares under a shareholder mandated program that authorizes buybacks of up to 10% of its issued share capital, drawing fresh attention to the stock.

See our latest analysis for Horizon Robotics.

At a latest share price of HK$7.17, Horizon Robotics has had a 1 day share price return of 0.84% and a 90 day share price decline of 23.56%, while its 1 year total shareholder return of 29.89% points to stronger longer term momentum.

If you are watching how buyback news can shift sentiment, it can be useful to scan other names in the space via our list of 34 robotics and automation stocks

With a shareholder approved buyback of up to 10% of its shares, a reported intrinsic discount and a wide gap to the average analyst target, investors now have to ask: is Horizon Robotics mispriced, or is the market already factoring in future growth?

Preferred Price to Sales Ratio of 24.3x: Is it justified?

Horizon Robotics trades at a P/S of 24.3x, which is well above both its Hong Kong Software industry average of 2.5x and a peer average of 9.7x. This is even as the stock changes hands at HK$7.17, below some fair value and analyst estimates.

The P/S multiple compares the company’s market value to its revenue. It is often used for high growth or loss making businesses where earnings are still negative. For an auto focused software and hardware provider like Horizon Robotics, a higher P/S can reflect expectations that its existing revenue base will scale, and that its automotive and non automotive solutions can support higher future cash flows.

Here, the gap is wide. The current 24.3x P/S is almost ten times the Hong Kong Software industry average of 2.5x and more than double the estimated fair P/S ratio of 11x that regression analysis suggests the market could eventually gravitate toward. That spread implies investors are paying a rich price relative to sales today, even after accounting for company specific factors embedded in the fair ratio.

Explore the SWS fair ratio for Horizon Robotics

Result: Price to Sales Ratio of 24.3x (OVERVALUED)

However, the current net loss of CN¥10,469.012 and a value score of 2 highlight profitability and valuation risks that could quickly challenge the buyback driven optimism.

Find out about the key risks to this Horizon Robotics narrative.

Another view on value: DCF points the other way

While the current 24.3x P/S looks rich against industry and peer benchmarks, the SWS DCF model presents a different perspective. With Horizon Robotics at HK$7.17 versus an estimated future cash flow value of HK$13.22, the shares appear undervalued. This raises the question of which signal may be more relevant for your analysis.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Horizon Robotics for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 231 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

The combination of rich multiples, buybacks and differing valuation signals may seem confusing, so consider acting promptly to test the thesis against the data yourself, then review the 2 key rewards

Looking for more investment ideas?

If Horizon Robotics has caught your attention, do not stop here. Broaden your watchlist with other ideas that fit your risk, return and income goals.

• Spot potential value opportunities early by scanning 231 high quality undervalued stocks that combine quality fundamentals with pricing that may still leave room for upside.
• Strengthen the defensive side of your portfolio with 300 resilient stocks with low risk scores that score well on resilience and financial stability.
• Refresh your income shortlist by reviewing 482 dividend fortresses offering higher yields that may appeal to dividend focused investors.

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.

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