If you have been following the ups and downs of NIO stock, you are not alone. Investors everywhere are weighing whether this electric vehicle pioneer is about to rally, or whether its latest moves are a signal to take a breather. Over the past year, NIO’s price has jumped 31.2%, a solid return for those who held tight. However, zoom out a bit further and you will see a rollercoaster, with the stock still down a steep 77.4% over five years. That mix of volatility and potential upside is exactly what makes NIO such a hot topic right now.
Signs of life have started reappearing. NIO’s shares have climbed 2.2% in just the last week, even as the stock dipped slightly by 2.0% over the past month. On a year-to-date basis, the stock is up an impressive 51.6%, reflecting renewed optimism about the company’s prospects after several quarters of cautious sentiment. Recent headlines about government support measures for China’s EV sector, combined with clarity around supply chain improvements, are helping to shape fresh investor confidence, even if the long-term chart still makes you pause.
As it stands, NIO is currently considered undervalued in one out of six key valuation checks, a modest score that starts to explain the mixed feelings seen in the market. But is that the whole story? Let’s break down the most common ways analysts try to value companies like NIO and see where the numbers might surprise you. And stick around; we will wrap up with a fresh perspective for anyone trying to make sense of these valuation scores.
NIO scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and then discounting those amounts back to their value today. For NIO, this method uses a “2 Stage Free Cash Flow to Equity” model, which takes into account both recent performance and longer-term expectations.
In the most recently reported twelve months, NIO’s free cash flow stands at roughly CN¥-20,209 million. Analysts expect the company’s cash flows to turn positive in the coming years, reaching CN¥8,264 million by 2029, with projections showing steady improvement through 2035. It is important to note that only the next few years are based on specific analyst estimates. Simply Wall St extrapolates further growth beyond that horizon.
After calculating these projected flows and discounting them back, the DCF model estimates the intrinsic value for NIO shares at around $6.17. With the stock currently trading at an 11.9% premium to this fair value, the numbers suggest NIO is slightly overvalued according to this lens.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests NIO may be overvalued by 11.9%. Find undervalued stocks or create your own screener to find better value opportunities.
When assessing companies that are not yet consistently profitable, the Price-to-Sales (PS) ratio becomes a valuable valuation tool. This metric lets investors compare the value of a company’s stock relative to its revenue, making it especially useful for high-growth industries where near-term profits might not tell the whole story. For NIO and its electric vehicle peers, revenue is an important measure of scale and market traction, even if earnings are still negative.
Growth expectations and business risk both play a role in what investors consider a “normal” or “fair” PS ratio. Rapidly growing firms in emerging sectors often trade at higher multiples, but this premium comes with added risk. Conversely, industry averages set a baseline, yet these may ignore the unique outlook or risks facing a specific company.
Right now, NIO trades on a PS ratio of 1.75x, which is slightly above the Auto industry average of 1.34x and just under the peer group average of 1.83x. Simply Wall St’s proprietary “Fair Ratio” for NIO stands at 1.48x, which incorporates factors like expected sales growth, profit margins, company size, and risk profile. Unlike simple industry or peer comparisons, the Fair Ratio is tailored to NIO’s own outlook and risk, offering a more balanced yardstick for valuation.
Because NIO’s PS ratio is only marginally above its Fair Ratio, it suggests the stock is priced about right on a revenue basis after accounting for both its promise and its risks.
Result: ABOUT RIGHT
PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your view of a company’s story brought to life with real numbers, such as your assumptions for NIO’s future revenue, earnings, and profit margins. This approach connects your perspective directly to a financial forecast and a fair value estimate.
Unlike traditional models where you just accept published targets, Narratives let you capture your own beliefs about NIO’s potential, risks, and factors that could drive its business forward or hold it back. Narratives are easily accessible on Simply Wall St’s platform, widely used by millions of investors via the Community page. They make sense of the numbers by letting you track how your Fair Value compares to the current price.
They are also dynamic, so whenever there is fresh news or new earnings, your Narrative updates instantly and you can see whether your investment view still aligns. For example, one investor might use an optimistic Narrative based on NIO’s battery innovations and revenue growth to calculate a fair value of $9.00 per share, while another might take a more cautious approach, set conservative forecasts, and arrive at a fair value closer to $3.00.
Do you think there’s more to the story for NIO? Create your own Narrative to let the Community know!
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.
Companies discussed in this article include NIO.
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