AMTD Digital (NYSE:HKD) just released its earnings for the half year ended April 2025, showing a sizable jump in both sales and revenue compared to the previous year. These results are catching investor attention.

AMTD Digital’s share price has surged in recent days, climbing by more than 74% in the past 24 hours and recording a 76.7% return over the past 90 days. However, its one-year total shareholder return is still down nearly 5%. This strong price movement suggests momentum is building on the latest earnings update, even as long-term shareholders remain in the red since the float.

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With shares rebounding sharply but longer-term returns still lagging, investors now face a key question: is AMTD Digital undervalued after its earnings pop, or are markets already factoring in the company’s future growth prospects?

Price-to-Earnings of 20.9x: Is it justified?

AMTD Digital is trading at a price-to-earnings (P/E) ratio of 20.9x, which sets the bar higher than its peer group average of 11.7x. This mark suggests that investors are paying a substantial premium for current earnings relative to similar companies.

The P/E ratio measures how much investors are willing to pay for each dollar of earnings, and it is widely used to compare valuation across companies in the same sector. In software, high multiples can sometimes hint at expectations for future growth, but recent negative earnings momentum raises questions for AMTD Digital.

While the P/E of 20.9x falls well below the broader US Software industry average of 34.1x, it remains expensive when compared to direct peers. This may signal that the market is pricing in a rebound, or it could simply be a holdover from past enthusiasm. In either case, such a premium means investors should scrutinize the underlying growth story and how sustainable it is before jumping in.

Result: Price-to-Earnings of 20.9x (OVERVALUED)

However, weak long-term returns and the absence of clear annual growth in revenue or net income could undermine the optimism following AMTD Digital’s earnings jump.

Another View: Discounted Cash Flow Signals More Downside

Taking a fresh perspective with our SWS DCF model, AMTD Digital appears even less attractive. The DCF approach estimates the company’s fair value at just $0.11 per share, which is far below the current market price of $2.95. This suggests shares could be significantly overvalued based on fundamentals.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AMTD Digital for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 832 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own AMTD Digital Narrative

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A great starting point for your AMTD Digital research is our analysis highlighting 1 key reward and 6 important warning signs that could impact your investment decision.

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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.