This module uses fundamental data of Li Auto to approximate the value of its Beneish M Score. Li Auto M Score tells investors if the company management is likely to be manipulating earnings. The score is calculated using eight financial indicators that are adjusted by a specific multiplier. Please note, the M Score is a probabilistic model and cannot detect companies that manipulate their earnings with 100% accuracy. Check out Li Auto Piotroski F Score and Li Auto Altman Z Score analysis.
For more detail on how to invest in Li Auto Stock please use our How to Invest in Li Auto guide.
At this time, it appears that Li Auto is an unlikely manipulator. The earnings manipulation may begin if Li Auto's top management creates an artificial sense of financial success, forcing the stock price to be traded at a high price-earnings multiple than it should be. In general, excessive earnings management by Li Auto executives may lead to removing some of the operating profits from subsequent periods to inflate earnings in the following periods. This way, the manipulation of Li Auto's earnings can lead to misrepresentations of actual financial condition, taking the otherwise loyal stakeholders on to the path of questionable ethical practices and plain fraud.
The cure to earnings manipulation is the transparency of financial reporting. It will typically remove the temptation of the top executives to inflate earnings (i.e., to promote the idea of 'winning at any cost'). Because a healthy internal audit department can enhance transparency, the board should promote the auditors' access to all the record-keeping systems across the enterprise. For example, if Li Auto's auditors report directly to the board (not management), the managers will be reluctant to manipulate simply due to the fear of punishment. On the other hand, the auditors will be free to investigate the ledgers properly because they know that the board has their back.
One of the toughest challenges investors face today is learning how to quickly synthesize historical financial statements and information provided by the company, SEC reporting, and various external parties in order to detect the potential manipulation of earnings. Understanding the correlation between Li Auto's different financial indicators related to revenue, expenses, operating profit, and net earnings helps investors identify and prioritize their investing strategies towards Li Auto in a much-optimized way. Analyzing correlations between earnings drivers directly associated with dollar figures is the most effective way to find Li Auto's degree of accounting gimmicks and manipulations.
M-Score is one of many grading techniques for value stocks. It was developed by Professor M. Daniel Beneish of the Kelley School of Business at Indiana University and published in 1999 under the paper titled The Detection of Earnings Manipulation. The Beneish score is a multi-factor model that utilizes financial identifiers to compile eight variables used to classify whether a company has manipulated its reported earnings. The variables are built from the officially filed financial statements to create a final score call 'M Score.' The score helps to identify companies that are likely to manipulate their profits if they show deteriorating gross margins, operating expenses, and leverage against growing revenue.
Although earnings manipulation is typically not the result of intentional misconduct by the c-level executives, it is still a widespread practice by the senior management of public companies such as Li Auto. It is usually done by a series of misrepresentations of various accounting rules and operating activities across multiple financial cycles. The best way to spot the manipulation is to examine the historical financial statement to find inconsistencies in earning reports to find trends in assets or liabilities that are not sustainable in the future.
Some studies have found that companies with high sustainability scores are getting higher valuations than competitors with lower social-engagement activities. While most ESG disclosures are voluntary and do not directly affect the long term financial condition, Li Auto's sustainability indicators can be used to identify proper investment strategies using environmental, social, and governance scores that are crucial to Li Auto's managers, analysts, and investors.
Environmental
Governance
Social
About Li Auto Fundamental Analysis
The Macroaxis Fundamental Analysis modules help investors analyze Li Auto's financials across various querterly and yearly statements, indicators and fundamental ratios. We help investors to determine the real value of Li Auto using virtually all public information available. We use both quantitative as well as qualitative analysis to arrive at the intrinsic value of Li Auto based on its fundamental data. In general, a quantitative approach, as applied to this company, focuses on analyzing financial statements comparatively, whereas a qaualitative method uses data that is important to a company's growth but cannot be measured and presented in a numerical way.
For more detail on how to invest in Li Auto Stock please use our How to Invest in Li Auto guide.You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Is Automobile Manufacturers space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Li Auto. If investors know Li Auto will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Li Auto listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
(0.01)
Earnings Share
1.32
Revenue Per Share
142.771
Quarterly Revenue Growth
0.236
Return On Assets
0.0289
The market value of Li Auto is measured differently than its book value, which is the value of Li Auto that is recorded on the company's balance sheet. Investors also form their own opinion of Li Auto's value that differs from its market value or its book value, called intrinsic value, which is Li Auto's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Li Auto's market value can be influenced by many factors that don't directly affect Li Auto's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Li Auto's value and its price as these two are different measures arrived at by different means. Investors typically determine if Li Auto is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Li Auto's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.