Li Auto Inc. (NASDAQ:LI) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Li Auto Inc., through its subsidiaries, designs, develops, manufactures, and sells new energy vehicles in the People’s Republic of China. The company’s loss has recently broadened since it announced a CN¥321m loss in the full financial year, compared to the latest trailing-twelve-month loss of CN¥355m, moving it further away from breakeven. The most pressing concern for investors is Li Auto'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.
Consensus from 30 of the American Auto analysts is that Li Auto is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of CN¥1.7b in 2023. Therefore, the company is expected to breakeven just over a year 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 68% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Li Auto's upcoming projects, but, bear in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital judiciously, with debt making up 20% 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 too many aspects of Li Auto to cover in one brief article, but the key fundamentals for the company can all be found in one place – Li Auto's company page on Simply Wall St. We've also compiled a list of essential aspects you should look at:
- Valuation: What is Li Auto 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 Li Auto is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Li Auto’s board and the CEO’s background.
- 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.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
