With the business potentially at an important milestone, we thought we'd take a closer look at Pinduoduo Inc.'s (NASDAQ:PDD) future prospects. Pinduoduo Inc., through its subsidiaries, operates an e-commerce platform in the People's Republic of China. The US$126b market-cap company’s loss lessened since it announced a CN¥7.2b loss in the full financial year, compared to the latest trailing-twelve-month loss of CN¥2.7b, as it approaches breakeven. As path to profitability is the topic on Pinduoduo's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
According to the 34 industry analysts covering Pinduoduo, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of CN¥2.6b in 2022. The company is therefore projected to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2022? Working backwards from analyst estimates, it turns out that they expect the company to grow 59% year-on-year, on average, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Given this is a high-level overview, we won’t go into details of Pinduoduo's upcoming projects, but, take into account that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 17% 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 key fundamentals of Pinduoduo which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Pinduoduo, take a look at Pinduoduo's company page on Simply Wall St. We've also compiled a list of essential factors you should look at:
- Valuation: What is Pinduoduo 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 Pinduoduo 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 Pinduoduo’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.
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.
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