Wondering if ZTO Express (Cayman) at around $21 still offers good value, or if you have already missed the delivery on the biggest gains? This breakdown will help you decide whether it deserves a spot on your watchlist.
Over the last month the stock is up 12.2%, lifting its 7 day return to 1.4% and putting its year to date gain at 11.2%. Longer term returns over 3 and 5 years are still negative, which hints at a shifting market view rather than a straight line growth story.
Recent headlines have focused on ZTO’s position in China’s parcel delivery market, including ongoing commentary about competition, regulation and the health of domestic e commerce, which all feed into sentiment around the stock. At the same time, investors have been paying closer attention to how efficiently major logistics players like ZTO can scale their networks while maintaining margins. This helps explain some of the recent share price recovery.
On our numbers ZTO scores a solid 5/6 valuation checks, suggesting it looks undervalued on most fronts. Next we will unpack what that means across different valuation approaches, before finishing with a more practical way to think about what the shares are really worth.
A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back to what they are worth today. For ZTO Express (Cayman), this is done using a 2 Stage Free Cash Flow to Equity approach, which models a faster growth phase followed by a more mature period.
ZTO currently generates roughly CN¥3.1 billion in free cash flow, and analysts expect this to climb sharply, with internal projections pointing to around CN¥18.1 billion in annual free cash flow ten years from now. The nearer term forecasts to 2027 are based on analyst estimates, while later years are extrapolated using Simply Wall St growth assumptions.
When all these future cash flows are discounted back, the model suggests an intrinsic value of about $44.66 per share, compared to a current price near $21. That implies the shares trade at roughly a 52.6% discount to their estimated fair value, based on the model’s assumptions.
For a consistently profitable business like ZTO Express (Cayman), the price to earnings, or PE, ratio is a straightforward way to gauge value because it ties the share price directly to the company’s current earnings power. In general, faster growing and lower risk companies deserve a higher PE ratio, while slower growth or higher risk names tend to trade on lower multiples.
ZTO currently trades on a PE of about 13.31x, which sits below both the logistics industry average of roughly 15.98x and the broader peer group average near 34.77x. Simply Wall St’s Fair Ratio for ZTO is 16.39x, a proprietary estimate of what would be a reasonable PE given its earnings growth outlook, margins, industry, size and specific risk profile. This makes it more tailored than a simple comparison to industry or peer averages, which can be skewed by outliers or companies at very different stages of maturity.
With ZTO’s actual PE below its Fair Ratio, the multiple based view points to the shares trading at a discount to what its fundamentals would typically justify.
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives, a simple way to connect your view of ZTO Express (Cayman)’s story to a concrete financial forecast and a fair value estimate. A Narrative starts with your perspective on the business, then translates that into assumptions about future revenue, earnings and margins. These in turn generate a Fair Value you can compare against the current share price to consider whether ZTO looks like a buy, hold or sell. Narratives are available on Simply Wall St’s Community page, where millions of investors can explore and create these story driven valuations. They update dynamically as new data, news or earnings are released so your view stays in sync with reality. For ZTO, one Narrative might lean into rising automation, stabilizing industry pricing and firmer margins to justify a fair value around $28.34. A more cautious Narrative could focus on slower parcel growth, competitive pressure and regulatory risk to anchor fair value nearer $17.79, showing how different but structured perspectives can coexist around the same stock.
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.
