Nio releases earnings Wednesday. Here’s how to value its stock compared to Tesla, Ford and other rivals

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Deep Dive

Published: Aug. 11, 2021 astatine 5:20 p.m. ET

Nio whitethorn beryllium a comparatively tiny company. But investors are bullish connected the Chinese electric-vehicle maker’s prospects.

A Nio store successful downtown Shanghai. (Getty Images)

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Chinese electric-vehicle shaper Nio Inc., which sells nary cars successful the U.S., has a marketplace capitalization of $60.2 billion. By that measure, it is larger than Ford Motor Co., which was founded successful 1903.

That mightiness marque consciousness to you arsenic an capitalist — aft all, Nio is an innovative institution that sells lone electrical vehicles. Ford is simply a bequest car shaper that is moving to drawback up and yet marque a afloat modulation to electrical vehicles. Shares of Nio person much than tripled successful the past year, portion Ford’s person astir doubled aft cratering successful the erstwhile decade.

So wherever does Nio NIO, -0.57%, which is scheduled to study second-quarter net aft the banal marketplace closes Wednesday, acceptable successful an concern thesis? Below are screens showing however its banal valuation compares to conveyance production, and however that valuation relates to projected net done 2025.

Doubling car production

For the 2nd quarter, Nio delivered 21,896 vehicles for a 112% summation from a twelvemonth earlier. The maturation is impressive, but the full fig of vehicles sold is inactive comparatively small.

Here’s a look astatine the 10 largest car makers by marketplace capitalization, on with their second-quarter income oregon transportation numbers (whichever was higher, if some were reported) and further colour beneath the table:

Company Market capitalization ($ millions) Total vehicles sold oregon delivered – 2nd quarter, 2021
Tesla Inc. TSLA, -0.31% $702,901 90,891
Toyota Motor Corp. TM, +0.82% 7203, +0.98% $293,507 2,545,000
Volkswagen AG VWAGY, +1.52% VOW, +0.60% $102,919 2,546,000
Daimler AG DMLRY, +0.92% DAI, +0.59% $93,333 736,400
General Motors Co. GM, +0.02% $78,771 1,757,000
Stellantis N.V. STLA, +1.09% $66,039 1,655,400
Nio Inc. ADR Class A NIO, -0.57% $60,215 21,896
Honda Motor Co. Ltd HMC, +0.98% 7267, +1.33% $59,415 998,000
Bayerische Motoren Werke AG BMWYY, +0.56% BMW, +0.54% $57,973 778,504
Ford Motor Co. F, +0.80% $54,228 764,000
Source: FactSet

Click connected the tickers for much astir each company.

You tin spot that those valuations are astir the future, erstwhile innovators successful the EV abstraction — Tesla Inc. TSLA, -0.31% and Nio, connected this database — whitethorn (or whitethorn not) go arsenic ample arsenic bequest players.

For now, Ford F, +0.80% churns retired mostly interior combustion motor (ICE) vehicles astatine astir 35 times the complaint that Nio makes EVs.

One happening to beryllium alert of is that the bequest car makers don’t each study their portion income the aforesaid way. Most don’t interruption retired electrical conveyance sales.

Among those that do, definitions vary. For example, Toyota Motor Corp. TM, +0.82% 7203, +0.98% reported that “electrified vehicle” income made up 26.6% of full car income during the 2nd quarter. But that class includes:

  • HEV – hybrid EVs that are not plug-ins.
  • PHEV – plug-in electrical vehicles.
  • BEV – artillery electrical vehicles.
  • FCEV – fuel-cell electrical vehicles.

For Toyota, BEV made up lone 0.2% of second-quarter sales, portion they accounted for 100% of income for Nio and Tesla. Toyota’s PHEV income made up 1.4% of the total.

Volkswagen AG VWAGY, +1.52% VOW, +0.60% reports electric-vehicle income arsenic including PHEV, which accounted for 6.7% of second-quarter sales, oregon BEV, which made up 4.4% of full sales. Those are awesome numbers: a combined 11.1%.

For Bayerische Motoren Werke Aktiengesellschaft BMWYY, +0.56% BMW, +0.54%, amended known arsenic BWM Group, a second-quarter breakdown of electric-vehicle deliveries isn’t yet available, but for the archetypal fractional of 2021, 153,243 all-electric oregon plug-in hybrid vehicles were delivered, oregon 11.4% of full deliveries.

Valuation to net estimates

For companies astatine aboriginal stages, comparisons of price-to-earnings ratios whitethorn not mean precise much. Such companies are focusing connected maturation alternatively than profits. An illustration of this has been Amazon.com Inc. AMZN, -0.86%, which has traded astatine a precocious P/E for decades arsenic it has worked to grow into caller lines of business, astatine the disbursal of the bottommost line.

A precocious P/E ratio tin bespeak investors’ enthusiasm for innovation and successful the lawsuit of EVs, a governmental statement for transforming the industry. So Nio and Tesla commercialized astatine overmuch higher P/E ratios than the bequest car makers.

Then again, precise debased P/E whitethorn amusement excessively overmuch contempt among investors for the older manufacturers, arsenic they usage their currency travel from continuing monolithic income of accepted vehicles to money their improvement of EVs. Opportunities whitethorn beryllium highlighted.

Normally a guardant P/E ratio is calculated by dividing the stock terms by a rolling statement estimation of net per stock for 12 months. This isn’t disposable for each the companies listed here, truthful we’re utilizing statement estimates for nett income for calendar 2022.

First, present are P/E ratios based connected existent marketplace caps and statement 2022 estimates among analysts polled by FactSet. The array includes the yearly estimates going retired to 2025, and besides a P/E based connected existent marketplace caps and the 2025 estimates:

Company Price/ est. 2022 earnings Price/ est. 2025 earnings Est. nett income – 2021 Est. nett income – 2022 Est. nett income – 2023 Est nett income – 2024 Est. nett income – 2025
Tesla Inc. 83.8 50.5 $5,963 $8,384 $10,609 $11,282 $13,930
Toyota Motor Corp. 11.5 9.0 $23,321 $25,620 $27,204 $30,603 $32,714
Volkswagen AG 5.4 4.3 $16,902 $18,918 $20,656 $23,042 $24,025
Daimler AG 6.6 6.3 $14,063 $14,196 $14,744 $15,567 $14,931
General Motors Co. 7.6 6.1 $9,487 $10,354 $10,240 $12,316 $12,865
Stellantis N.V. 4.9 4.0 $12,421 $13,363 $14,642 $17,013 $16,525
Nio Inc. N/A 37.7 -$1,019 -$56 $382 $727 $1,596
Honda Motor Co. Ltd. 8.5 7.4 $6,211 $7,014 $7,567 $7,702 $8,079
Bayerische Motoren Werke AG 5.6 4.8 $11,287 $10,344 $10,669 $11,508 $12,183
Ford Motor Co. 7.1 5.5 $6,300 $7,668 $8,299 $9,666 $9,864
Source: FactSet

Nio is expected to go profitable successful 2023. Looking retired to 2024, its guardant P/E is little than that of Tesla. To enactment the guardant P/E valuations successful perspective, the S&P 500 Index SPX, +0.25% trades for a weighted 20.5 times statement 2022 EPS estimates.

Valuation to sales

Forward price-to-sales estimates mightiness beryllium much utile for early-stage companies that are showing debased profits oregon nett losses. Then again, the aforesaid distortions apply: Investors emotion the pure-play EV makers now, and whitethorn beryllium paying excessively overmuch for them erstwhile you see that shares of Nio person much than tripled implicit the past year, portion Tesla’s banal has risen 150%.

Here’s a akin acceptable of information driving price-to-sale ratios, again utilizing existent marketplace caps (in the archetypal array astatine the apical of this article) and statement full-calendar-year estimates successful millions of U.S. dollars:

Company Price/ est. 2022 sales Price/ est. 2025 sales Est. income – 2021 Est. income – 2022 Est. income – 2023 Est. income – 2024 Est. income – 2025
Tesla Inc. 14.0 6.0 $50,043 $67,624 $82,515 $100,867 $118,119
Toyota Motor Corp. 1.1 0.9 $274,918 $294,507 $303,894 $313,997 $320,603
Volkswagen AG 0.3 0.3 $296,465 $313,887 $325,729 $347,833 $349,813
Daimler AG 0.5 0.4 $201,180 $213,412 $219,048 $221,998 $209,239
General Motors Co. 0.6 0.5 $136,113 $156,867 $155,167 $163,637 $171,301
Stellantis N.V. 0.4 0.3 $184,595 $200,063 $207,542 $223,725 $229,321
Nio Inc. 11.0 2.6 $5,471 $9,076 $13,084 $16,889 $23,011
Honda Motor Co. Ltd. 0.4 0.4 $134,509 $146,000 $149,629 $149,277 $148,827
Bayerische Motoren Werke AG 0.4 0.3 $130,883 $141,358 $145,773 $151,385 $171,524
Ford Motor Co. 0.4 N/A $139,171 $167,433 $173,633 N/A N/A

For reference, the S&P 500 trades for 2.7 times its statement 2022 income estimate.

Analysts’ opinions

Here’s a summary of sentiment of the 10 car makers among analysts polled by FactSet. For companies with superior listings extracurricular the U.S., the section tickers are used. All stock prices and targets are successful section currencies:

Company Share “buy” ratings Closing terms – Aug. 11 Consensus terms target Implied 12-month upside potential
Tesla Inc. TSLA, -0.31% 44% 707.82 694.96 -2%
Toyota Motor Corp.  7203, +0.98% 64% 9,973.00 11,110.53 11%
Volkswagen AG VOW, +0.60% 80% 299.40 278.90 -7%
Daimler AG DAI, +0.59% 74% 74.88 95.73 28%
General Motors Co. GM, +0.02% 88% 54.27 72.75 34%
Stellantis N.V. STLA, +1.09% 88% 21.32 27.30 28%
NIO Inc. ADR Class A NIO, -0.57% 93% 43.98 61.12 39%
Honda Motor Co. Ltd. 7267, +1.33% 79% 3,649.00 4,203.13 15%
Bayerische Motoren Werke AG BMW, +0.54% 42% 82.29 102.73 25%
Ford Motor Co. F, +0.80% 57% 13.95 16.08 15%
Source: FactSet

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