Evaluating Valuation After Earnings Upgrades and Ongoing Share Buybacks
ZTO Express (Cayman) NYSE:ZTO is back on investors radar after a stretch of strong momentum, with upgraded earnings estimates, active share repurchases and a double digit gain over the past 3 months.
See our latest analysis for ZTO Express (Cayman).
The latest 15 percent 30 day share price return to $21.68 comes on top of upbeat earnings revisions, steady buybacks, and expectations for double digit parcel growth. This signals that near term momentum is strengthening even though the three year total shareholder return is still slightly negative.
If ZTO’s improving trend has you thinking more broadly about logistics and transport names, this could be a good moment to explore auto manufacturers as potential complementary plays.
With earnings moving higher, buybacks ongoing, and the share price still trading at a steep intrinsic discount, the key question now is whether ZTO is genuinely undervalued or whether the market is already pricing in its next leg of growth.
With the latest close at $21.68 and a narrative fair value of $23.29, the story assumes today’s price still trails improving fundamentals.
Ongoing mix improvement reflected in over 50% year on year growth in retail parcel volume and a higher share of differentiated/premium services supports higher per parcel unit revenues and gross profits (for example, CN¥0.17 per unit lift in revenue and CN¥0.02 per unit in gross profit), buffering the business against commoditization and enhancing medium term earnings.
Curious how steady but unspectacular growth, firmer margins, and a leaner share count can still point to upside from here? The full narrative breaks down the earnings path, the revenue runway, and the profit multiple that need to line up for that fair value to make sense.
Result: Fair Value of $23.29 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, sustained price competition and slower parcel growth could squeeze margins and curb earnings momentum, which would challenge the case for a higher valuation.
Find out about the key risks to this ZTO Express (Cayman) narrative.
If this perspective does not fully align with your own thinking, or you would rather dig into the numbers yourself, you can build a custom narrative in just a few minutes by starting with Do it your way.
A great starting point for your ZTO Express (Cayman) research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
