Futu Holdings has given investors a mixed experience, with the stock sharply down year to date yet still showing a strong 3 year return. The current Excess Returns intrinsic value estimate and market multiples both suggest the shares may be trading below what the fundamentals imply.

• Over the past 3 years, Futu Holdings has returned 88.9%, which keeps the longer term track record in positive territory despite recent weakness.
• Expectations for the company’s ability to keep converting growth into sustainable cash flow can support the valuation, while any setback in profitability or regulatory pressure may weigh heavily on what investors are willing to pay.
• On Simply Wall St’s checks, Futu Holdings screens as undervalued in 5 of 6 measures, indicating that the broader set of valuation tests leans cheap rather than expensive for the current share price.

The stock’s next move may depend on whether the market closes the gap between Futu Holdings’ current price and what the intrinsic value work suggests the business could be worth.

Is Futu Holdings Still Cheap on Excess Returns?

The Excess Returns model for Futu Holdings starts by comparing the return the company is expected to earn on its equity with the cost of that equity. For Futu Holdings, the stable EPS estimate of $93.40 per share on a stable book value of $431.13 per share implies an average Return on Equity of 21.66%, which is above the modelled cost of equity of $37.59 per share.

This spread creates an excess return of $55.82 per share, which compounds over time and feeds into an intrinsic value estimate of $192.46 per share. Compared with the current market price, the model implies an intrinsic discount of 48.6%, so the stock screens as undervalued on this framework. The relatively high book value base of $293.86 per share, together with the projected stable book value, indicates that the model assumes Futu Holdings can keep reinvesting equity at returns above its funding cost rather than relying on aggressive growth forecasts alone.

On these Excess Returns assumptions, Futu Holdings stock appears undervalued relative to its estimated intrinsic value.

Our Excess Returns analysis suggests Futu Holdings is undervalued by 48.6%. Track this in your watchlist or portfolio, or discover 38 more high quality undervalued stocks.

Is Futu Holdings Still Cheap on Earnings?

P/E is a useful cross check for Futu Holdings because earnings are available and the stock is already being assessed using return on equity. On this measure, Futu Holdings trades on a P/E of 10.8x, which is well below the Capital Markets industry average of 39.1x and also below the broader peer group average of 29.3x.

The tailored fair P/E ratio, which reflects the company’s growth, margins, size and risk profile, sits at 22.2x. That is roughly double the current 10.8x multiple, so the stock is pricing in a meaningful discount to what this framework suggests investors might typically pay for Futu Holdings. If the earnings profile and risk assumptions behind the fair P/E hold up, the current gap points to a stock that is being valued cautiously rather than aggressively.

On the P/E multiple, Futu Holdings stock appears undervalued relative to its modelled fair ratio and to sector peers.

The Futu Holdings Narrative: What Would Justify Today's Price?

Simply Wall St Narratives take the valuation puzzle around Futu Holdings and turn it into clear, testable stories about what would need to happen to growth, margins and earnings for the stock to be worth materially more or less than it is today, and they sit on Simply Wall St's Community page. Rather than relying on a single multiple or model output, each narrative lays out the assumptions behind its fair value so you can compare them with actual results as they are reported.

One of the top community narratives on Futu Holdings: 36% undervalued

"Ongoing international expansion, diverse product offerings, and AI-driven platform upgrades strengthen user growth, engagement, and long-term revenue stability."

Do you think there's more to the story for Futu Holdings? Head over to our Community to see what others are saying!

The Bottom Line

For Futu Holdings, both the Excess Returns intrinsic value estimate and the P/E comparison point in the same direction, suggesting the stock is screening as undervalued rather than fully priced. The key debate from here is whether the company can keep earning returns on equity that justify the intrinsic value work while maintaining an earnings profile that eventually supports a higher multiple.

If profitability or regulatory pressures undercut those assumptions, the current discount could prove warranted. If they hold, the main swing factor is whether the market is willing to close the gap between today’s price and what the models imply Futu Holdings might be worth.

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.