Pinduoduo Inc.’s (NASDAQ:PDD): Pinduoduo Inc. operates an e-commerce platform in the People’s Republic of China. The US$28b market-cap posted a loss in its most recent financial year of -CN¥498.7m and a latest trailing-twelve-month loss of -CN¥7.9b leading to an even wider gap between loss and breakeven. As path to profitability is the topic on PDD’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for PDD’s growth and when analysts expect the company to become profitable.
Consensus from the 8 Online Retail analysts is PDD is on the verge of breakeven. They anticipate the company to incur a final loss in 2019, before generating positive profits of CN¥7.3b in 2020. Therefore, PDD is expected to breakeven roughly a couple of months from now! In order to meet this breakeven date, I calculated the rate at which PDD must grow year-on-year. It turns out an average annual growth rate of 122% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving PDD’s growth isn’t the focus of this broad overview, however, bear in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I’d like to point out is that PDD has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which usually has a high level of debt relative to its equity. This means that PDD has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
There are too many aspects of PDD to cover in one brief article, but the key fundamentals for the company can all be found in one place – PDD’s company page on Simply Wall St. I’ve also put together a list of pertinent aspects you should further research:
- Valuation: What is PDD 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 PDD 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 Pinduoduo’s board and the CEO’s back ground.
- 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.