If you have been following Xiaomi’s stock, you know the story has been anything but boring. In the past year alone, the share price soared an eye-catching 176.9%, scaling up to a massive 509.9% return over three years. Even over the last month, Xiaomi gained 6.4%, standing out in a choppy market. It is no wonder investors are wondering whether it is time to hop on the bandwagon, double down, or take some of those gains off the table.
There are plenty of reasons fueling this rapid climb. Optimism around smartphone innovation, hopes for stronger global demand, and increased investor confidence in China’s consumer tech sector have all helped push Xiaomi’s market value higher. The only mild pause so far is a slight dip of -1.6% over the past week, which seems more like a breather than a major setback given the broader trajectory.
With Xiaomi closing most recently at 56.9, the big question is not just if the company can keep climbing, but whether it is still priced attractively for new or existing investors. Looking at traditional valuation signals, Xiaomi’s value score lands at 0 out of 6, meaning it does not pass any of the common undervaluation checks. Does that mean it is time to reconsider, or is there more to the story?
Let’s break down the key valuation measures to see if Xiaomi is truly overvalued, or if there are other angles to consider that could give a more complete picture, especially one that many investors overlook until the very end.
Xiaomi scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and discounting them back to today’s value. This method helps investors determine what a business might be worth, based on its expected ability to generate cash.
For Xiaomi, the latest twelve months’ Free Cash Flow stands at CN¥56.7 billion. Analysts forecast that this figure will rise over the coming years, expecting Free Cash Flow to reach CN¥68.8 billion by 2029. While analysts provide detailed estimates for the next five years, numbers beyond that are extrapolated from recent trends to map out Xiaomi’s decade-long potential.
Based on these projections, the DCF model calculates Xiaomi’s fair value at CN¥38.55 per share. This is significantly lower than its current share price of HK$56.9. The analysis suggests Xiaomi is around 47.6% overvalued when evaluated with this approach.
In summary, according to the Discounted Cash Flow analysis, the market is pricing Xiaomi well above its calculated intrinsic value at this point in time.
The Price-to-Earnings (PE) ratio is often the go-to metric for evaluating profitable tech companies like Xiaomi. It works well because it directly links what investors are willing to pay for each unit of earnings, which is a key factor for companies with established, consistent profits. The right PE ratio for any company depends on growth expectations and risk, with higher growth and lower risk generally justifying a higher PE.
Xiaomi currently trades at a PE ratio of 36.4x, which is well above the Tech industry average of 24.5x and the average among its peers at 20.4x. At first glance, this premium might seem high. However, Simple Wall St’s proprietary “Fair Ratio” for Xiaomi stands at 25.9x. This Fair Ratio is tailored and goes beyond surface-level comparison by weighing Xiaomi’s expected growth, profit margins, size, risk profile, and position within the industry. That means it offers a more precise benchmark than simply lining up Xiaomi next to its industry or similar companies.
Comparing these figures, Xiaomi’s 36.4x multiple is noticeably higher than its Fair Ratio of 25.9x. This suggests the stock price is running ahead of what you would expect given the company’s fundamentals and risk profile.
Earlier, we mentioned there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is a simple yet dynamic tool that lets you build your own story of what you believe about Xiaomi, where you think the company is headed, what revenues, earnings, or margins it could achieve, and what it should be worth.
Unlike a static ratio or model, Narratives connect your vision of Xiaomi’s future directly to a financial forecast and a fair value estimate. They make your investment decisions more guided and personal by allowing you to capture your confidence or caution in the company’s journey beyond just the numbers.
On Simply Wall St’s Community page, millions of investors can easily create or explore Narratives for Xiaomi. By comparing the Fair Value from each Narrative with the current share price, investors can quickly decide if it’s a potential buy, hold, or sell based on their outlook.
The best part is that Narratives update automatically whenever new news or results are released, so your story (and your numbers) stay relevant and informed. For example, while some investors believe Xiaomi could be worth as much as HK$80.38 if its electric vehicles and IoT business truly take off, others are far more cautious, seeing a fair value closer to HK$36.17 due to intense competition and margin pressure. Which story makes sense to you?
For Xiaomi, we will make it really easy for you with previews of two leading Xiaomi Narratives:
🐂 Xiaomi Bull Case
Fair Value: HK$66.01
Currently 13.7% undervalued compared to narrative fair value
Forecast Revenue Growth: 21.3%
Growth is driven by expansion into smart ecosystem products, premium devices, and a global retail presence, supporting higher margins and revenues.
Large investments in AI, chip technology, and sustainability are expected to differentiate Xiaomi, build recurring higher-margin services, and strengthen the brand against regulatory and market risk.
Key risks include industry competition and pricing pressure, margin improvement challenges, and uncertainties in international expansion and new business lines such as electric vehicles.
🐻 Xiaomi Bear Case
Fair Value: HK$51.83
Currently 9.8% overvalued compared to narrative fair value
Forecast Revenue Growth: 15%
Xiaomi’s rise has been fueled by aggressive pricing, cost-efficient operations, and rapid expansion into smartphones and IoT, particularly in emerging markets.
Ongoing diversification into electric vehicles and a focus on high-margin software and services present opportunities, but heavy reliance on low-margin hardware and high capital requirements create risks.
Achieving high earnings will depend on successful execution in EVs and service monetization. Challenges include margin pressure, geopolitical risks, and market competition.
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.
Companies discussed in this article include 1810.HK.
