NIO Limited (NYSE:NIO): Is Breakeven Near?

Simply Wall St
·3 min read

NIO Limited (NYSE:NIO) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. NIO Limited designs, manufactures, and sells electric vehicles in the People’s Republic of China, Hong Kong, the United States, the United Kingdom, and Germany. The US$68b market-cap company announced a latest loss of CN¥5.6b on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is NIO's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for NIO

NIO is bordering on breakeven, according to the 16 American Auto analysts. They anticipate the company to incur a final loss in 2022, before generating positive profits of CN¥2.4b in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 71% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

Underlying developments driving NIO's growth isn’t the focus of this broad overview, however, take into account that by and large 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 aspect worth mentioning. The company has managed its capital judiciously, with debt making up 25% of equity. This means that it 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 NIO which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at NIO, take a look at NIO's company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at:

  1. 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.

  2. 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.

  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.

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. 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.

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