Nio Inc – ADR (NYSE:NIO) stocks lagged the S&P 500 in 2021, delivering a 27.1% total return loss.
Nio’s stock will run out in 2021, but value investors may be wondering if it’s time to buy the dip.
Income: A price-to-earnings ratio (PE) is one of the most basic fundamental metrics for measuring a stock’s value. The lower the PE, the higher the value.
In comparison, the S&P 500’s PE currently stands at about 34, more than double its long-term average of 15.9. Nio currently has no PE ratio because the company is not profitable. In the most recent quarter, Nio reported a net loss of $659.2 million.
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Grow: Looking ahead to the next four quarters, the S&P 500’s forward PE ratio looks much more reasonable at just 20.3. Unfortunately, analysts don’t expect Nio to make a profit in the next four quarters. The current consensus estimate of earnings per share for Nio for 2022 is a loss of 12 cents. Nio’s consumer cyclical sector peers currently have an average of 29.5 forward earnings multiple.
But when it comes to evaluating a stock, earnings aren’t everything.
The growth rate is also critical for companies that are building their bottom line quickly. The price-earnings ratio (PEG) is a good way to include growth rates in the evaluation process. The overall PEG of the S&P 500 is about 1. Again, without positive gains, Nio does not have a positive PEG ratio to use as a valuation metric.
The price-to-sales ratio is another important valuation metric, especially for unprofitable companies and growth stocks. The S&P 500’s PS ratio is 3.14, well above its long-term average of 1.62. Nio’s PS ratio is 13.6, more than four times higher than the S&P 500 average. Nio’s PS ratio is also up 840.2% over the past two years, suggesting that the stock’s price is still at the high end of its historical valuation range.
Finally, Wall Street analysts see value in Nio stock over the next 12 months. The average price target for under-21 analysts covering Nio is $58.25, indicating an increase of about 60.7% from current levels.
The verdict: At the current price, Nio stock appears extremely overvalued based on a sample of common fundamental valuation metrics.
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