-
If you are wondering whether NIO at around US$4.64 is a bargain or a value trap, you are not alone, and that is exactly what this article is here to unpack.
-
The stock has had a mixed ride, with a 9.7% decline over the last week and 7.8% decline over the last month, alongside an 11.3% return over the past year but a 60.7% decline over three years and 91.8% decline over five years.
-
Recent coverage has focused on NIO’s position in the electric vehicle space and how investor sentiment has shifted over time, especially given the large swings in its multi year returns. This context helps explain why some investors now see potential value while others remain cautious about the risks.
-
NIO currently scores 2 out of 6 on our valuation checks, which suggests only some measures point to the stock being undervalued. In the sections that follow, we will walk through what different valuation approaches are saying and then finish with a more complete way to think about its value beyond the usual metrics.
NIO scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
A Discounted Cash Flow, or DCF, model takes estimates of a company’s future cash flows and discounts them back to today using a required rate of return, to arrive at an estimate of what the business might be worth per share.
For NIO, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections expressed in CN¥. The latest twelve month free cash flow is a loss of CN¥19,679.27m. Analyst inputs run through 2030, with free cash flow for that year projected at CN¥9,666m, and further years extrapolated by Simply Wall St beyond the analyst horizon.
Bringing all those projected cash flows back to today, the model arrives at an estimated intrinsic value of about US$4.87 per share, compared with the current share price of roughly US$4.64. That points to an implied discount of about 4.7%, which is a small gap rather than a clear bargain.
Result: ABOUT RIGHT
NIO is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment’s notice. Track the value in your watchlist or portfolio and be alerted on when to act.
For companies where earnings are weak or volatile, pricing based on sales can be a more useful yardstick than P/E, because it focuses on what investors are paying for each dollar of revenue rather than profits that may be temporarily depressed.
What counts as a reasonable P/S multiple usually reflects what the market thinks about a company’s growth potential and risk. Higher expected growth or lower perceived risk can justify a higher P/S, while slower growth or higher risk often lines up with a lower multiple.
NIO currently trades on a P/S of about 1.13x, compared with the Auto industry average of roughly 0.60x and a peer average of around 2.57x. Simply Wall St’s “Fair Ratio” for NIO, at about 1.05x, is its estimate of what P/S might be appropriate after factoring in elements like earnings growth, profit margins, market cap, risks and the broader industry.
This Fair Ratio goes a step beyond simple peer or industry comparisons, because it adjusts for NIO specific characteristics rather than assuming all Auto stocks deserve similar pricing.
Set against the current P/S of 1.13x, the Fair Ratio of 1.05x suggests NIO’s valuation is slightly above that level, but the gap is small.
Result: ABOUT RIGHT
P/S ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1444 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce Narratives. These are simply your own story about NIO linked to a forecast of its future revenue, earnings and margins, and then to a fair value that you can compare with today’s price in an easy tool on Simply Wall St’s Community page, used by millions of investors. Narratives update automatically as new news or earnings arrive, and different investors can see NIO very differently. For example, one Narrative might lean closer to the higher US$9.00 analyst target because it puts more weight on chip licensing revenue and delivery growth. Another might lean toward the lower US$3.00 target because it focuses on competition, softer demand expectations and margin pressure.
Do you think there’s more to the story for NIO? Head over to our Community to see what others are saying!
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com