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We feel now is a pretty good time to analyse NIO Inc.'s (NYSE:NIO) business as it appears the company may be on the cusp of a considerable accomplishment. NIO Inc. designs, develops, manufactures, and sells smart electric vehicles in China. The US$31b market-cap company announced a latest loss of CN¥11b on 31 December 2021 for its most recent financial year result. As path to profitability is the topic on NIO's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Consensus from 26 of the American Auto analysts is that NIO is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of CN¥2.5b in 2024. Therefore, the company is expected to breakeven roughly 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 77%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving NIO's growth isn’t the focus of this broad overview, though, bear in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one issue worth mentioning. NIO currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in NIO's case is 45%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on NIO, so if you are interested in understanding the company at a deeper level, take a look at NIO's company page on Simply Wall St. We've also put together a list of key aspects you should further research:
Valuation: What is NIO worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether NIO is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on NIO’s board and the CEO’s background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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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.