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Pinduoduo Inc.'s (NASDAQ:PDD) Shift From Loss To Profit

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Simply Wall St
·3 min read
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Pinduoduo Inc.'s (NASDAQ:PDD): Pinduoduo Inc., through its subsidiaries, operates an e-commerce platform in the People's Republic of China. The US$42b market-cap company’s loss lessens since it announced a -CN¥10.3b bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -CN¥7.6b, as it approaches breakeven. As path to profitability is the topic on PDD’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for PDD, its year of breakeven and its implied growth rate.

Check out our latest analysis for Pinduoduo

According to the 26 industry analysts covering PDD, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2020, before generating positive profits of CN¥5.5b in 2021. Therefore, PDD is expected to breakeven roughly a few months from now. How fast will PDD have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 104% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGS:PDD Past and Future Earnings, February 21st 2020
NasdaqGS:PDD Past and Future Earnings, February 21st 2020

I’m not going to go through company-specific developments for PDD given that this is a high-level summary, though, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before I wrap up, there’s one aspect worth mentioning. PDD has managed its capital judiciously, with debt making up 20% of equity. This means that PDD has predominantly funded its operations from equity capital,and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of PDD which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at PDD, take a look at PDD’s company page on Simply Wall St. I’ve also put together a list of pertinent factors you should further research:

  1. 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.

  2. 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.

  3. 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.