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 smart electric sport utility vehicles (SUVs) in China. On 31 December 2020, the US$23b market-cap company posted a loss of CN¥806m for its most recent financial year. Many investors are wondering about the rate at which Li Auto will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Li Auto is bordering on breakeven, according to the 13 American Auto analysts. They anticipate the company to incur a final loss in 2021, before generating positive profits of CN¥669m in 2022. Therefore, the company is expected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 100%, 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, though, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we’d like to point out is that The company has managed its capital judiciously, with debt making up 2.3% 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.
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 important factors 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. 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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