Is It Too Late To Consider Semiconductor Manufacturing International (SEHK:981) After 138% Annual Surge?

• If you are wondering whether Semiconductor Manufacturing International is attractively priced right now, you are not alone. This article will walk through what the current share price may imply about its value.
• The stock last closed at HK$74.95, with returns of 4.9% over 7 days, 8.9% over 30 days, a 0.2% decline year to date, and gains of 138.3% over 1 year, 337.3% over 3 years and 166.3% over 5 years.
• These moves sit against a backdrop of ongoing attention on global chip supply, sector capacity expansion and policy developments that affect how investors think about semiconductor manufacturers' growth potential and risks. Together, these themes provide important context when you weigh up whether the recent share price history still lines up with the underlying business.
• Despite the strong long term returns, Semiconductor Manufacturing International currently has a valuation score of 0 out of 6. We will walk through traditional valuation methods next, then finish by looking at a broader way to think about what this might mean for you.

Semiconductor Manufacturing International scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Semiconductor Manufacturing International Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business might be worth by projecting its future cash flows and then discounting those back to today’s value.

For Semiconductor Manufacturing International, the latest twelve month free cash flow is a loss of $5,888.80m. Analysts have provided free cash flow estimates for the next few years, and Simply Wall St extends these out using a 2 Stage Free Cash Flow to Equity approach. Under these projections, free cash flow for 2030 is estimated at $3,837m, with interim years moving from negative to positive as shown in the ten year forecast path.

When all those projected cash flows are discounted back using this model, the estimated intrinsic value comes out at $39.47 per share. Against a current share price of HK$74.95, this implies the stock is about 89.9% above the DCF estimate. On this model Semiconductor Manufacturing International screens as expensive.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Semiconductor Manufacturing International may be overvalued by 89.9%. Discover 883 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 Semiconductor Manufacturing International.

Approach 2: Semiconductor Manufacturing International Price vs Earnings

For profitable companies, the P/E ratio is a handy way to think about what you are paying for each unit of current earnings, so it is a useful cross check alongside a DCF model.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risks. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk tends to line up with a lower multiple.

Semiconductor Manufacturing International is trading on a P/E of 124.14x. This sits above both the Semiconductor industry average of 39.14x and the peer group average of 33.32x. Simply Wall St also calculates a proprietary “Fair Ratio” for the stock of 40.70x, which reflects factors such as earnings growth, industry, profit margins, market cap and company specific risks.

This Fair Ratio aims to give a more tailored anchor than a simple comparison with peers or the broad industry, because it adjusts for the company’s own growth profile and risk characteristics rather than treating all semiconductor stocks as alike.

Compared with this Fair Ratio of 40.70x, the current P/E of 124.14x suggests Semiconductor Manufacturing International screens as expensive on this metric.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1446 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Semiconductor Manufacturing International Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you write a clear story about Semiconductor Manufacturing International, link that story to your own forecasts for revenue, earnings, margins and fair value, and then compare that fair value with the current price to help inform your decision. The Narrative keeps updating as new earnings or news arrive. One investor might build a bullish Narrative that leans closer to the HK$68.00 fair value assumption, while another might take a cautious view closer to HK$20.00. Both can then see, at a glance, how their story translates into numbers and a price anchor they can track over time.

Do you think there's more to the story for Semiconductor Manufacturing International? 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.

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