Has NIO’s Value Shifted After May Delivery Surprise and Recent Share Price Slide?

If you have been scratching your head about what to do with NIO stock lately, you are not alone. NIO has always been a polarizing name; just glance at its recent rollercoaster in the market. After a solid start to the year with a 48.4% jump year-to-date and a 29.3% gain over the last 12 months, the last month hasn’t been as kind, down 9.4%. Three-year and five-year returns are deep in the red, and yet, many are still eyeing NIO as a potential growth story.

Some of the recent volatility can be traced back to a flurry of news surrounding both the electric vehicle sector and NIO specifically. Investors have been recalibrating their appetite for risk as the global EV market sends mixed signals. There is clear long-term potential, but not without plenty of bumps along the way.

When it comes to value, the numbers are honest. Out of six standard measures we use to spot undervalued companies, NIO only ticks the box for one, giving it a valuation score of 1. That might make you wonder whether now is the right time to buy, hold, or steer clear.

To help make sense of it all, I will break down how valuation checks stack up for NIO, using different standard approaches. And, just in case you are looking for a perspective that goes beyond the usual analyses, stick around; I will reveal a more holistic approach to valuation at the end.

NIO scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: NIO Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a fundamental approach to valuation that estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today’s terms. This method accounts for the value of money over time, helping investors determine whether a stock price reflects its underlying business potential.

For NIO, the latest reported Free Cash Flow stands at a negative CN¥20.2 billion. Over the coming years, analysts forecast improvements, with projections turning positive by 2027 and moving to CN¥8.3 billion by the end of 2029. While analyst estimates only extend a few years out, longer-term figures are extrapolated to cover a full decade. This approach offers a fuller picture of future potential in the company's home currency, CN¥.

Based on these cash flow projections and using the 2 Stage Free Cash Flow to Equity model, the DCF analysis estimates NIO’s intrinsic value per share at $6.11. This is about 10.5% below the current trading price, indicating the stock is slightly overvalued by this measure.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for NIO.

Our Discounted Cash Flow (DCF) analysis suggests NIO may be overvalued by 10.5%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: NIO Price vs Sales

The Price-to-Sales (P/S) ratio is a useful valuation tool for companies like NIO, especially when they are not yet profitable. It measures how much investors are willing to pay for each dollar of sales, offering a clearer view for high-growth companies where earnings are negative or volatile.

Typically, a company with rapid sales growth or strong future prospects can justify a higher P/S ratio. In contrast, higher risks or slowing growth trends usually bring it down. What counts as a fair P/S ratio often depends on industry standards, growth rates, and a company’s risk profile.

NIO currently trades at a P/S ratio of 1.71x. For context, the average P/S ratio among its industry peers is 3.27x, while the broader auto industry average sits at 1.28x. However, rather than just comparing NIO with peers or the industry, Simply Wall St's "Fair Ratio" offers a more nuanced benchmark. The Fair Ratio for NIO stands at 1.49x and accounts for more than just sales, considering the company's growth, industry, profit margins, market cap, and risk profile. This approach delivers a tailored yardstick that goes beyond simple averages and provides a more holistic perspective.

Stacking these numbers side by side, NIO's actual P/S (1.71x) is only slightly above its Fair Ratio (1.49x). Since this difference is within a narrow range, it suggests the stock is valued about right in today’s market based on sales fundamentals.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your NIO Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, the powerful way to bring your story and assumptions into the heart of every investment decision.

A Narrative is more than just a set of numbers; it is your personalized take on a company, where you tie together your assumptions about NIO's future revenue growth, profit margins, and fair value into a single, cohesive story.

On Simply Wall St’s Community page, Narratives make this process easy and accessible for anyone, whether you are new to investing or a market veteran. You connect the company’s story to your own financial forecasts, then see if your view on fair value lines up with the current share price, helping you decide whether to buy, sell, or hold.

What makes Narratives especially useful is that they update dynamically with each new development, such as earnings releases or market news, so your investment thesis always reflects the latest information.

For example, investor viewpoints on NIO range from the bullish camp (with a fair value estimate as high as $9.00, expecting strong growth from new model launches), to the bearish side (setting fair value at just $3.00 based on persistent profitability risks). Which Narrative feels right to you?

Do you think there's more to the story for NIO? Create your own Narrative to let the Community know!

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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