Shanghai, China-based e-commerce company, Dingdong (Cayman) Limited (DDL), operates as an on-demand e-commerce company. The company offers vegetables, fresh produce, fruits, seafood products, meat, and eggs. It also provides ready-to-eat, ready-to-cook, ready-to-heat products and dairy and bakery products. DDL operates as a self-operated online retail business primarily through Dingdong Fresh. DDL priced its initial public offering of 4.07 million American Depositary Shares (ADS) at $23.5 per ADS. The total offering stood at $95.70 million. The ADSs began trading on the New York Stock Exchange on June 29, 2021.

Last month, DDL issued an apology concerning Beijing’s local market regulator’s order to “fulfill food safety responsibilities,” according to a government announcement. A company spokesperson said that the company had immediately ceased operations of the questionable facilities to allow inspection. The spokesperson added that “Dingdong has since conducted an investigation into all of its frontline fulfillment stations and processes to ensure all standards are strictly enforced.”

DDL’s stock has declined 77.5% in price since it went public on June 29, 2021, and 67.2% year-to-date. However, the stock has gained 40.2% over the past month to close yesterday’s trading session at $5.30.

Here is what could shape DDL’s performance in the near term.

Mixed Analyst Sentiments

The  $3.82 billion consensus revenue estimate  for its fiscal year 2022 indicates a 21% year-over-year increase. Likewise, the Street’s $4.71 billion revenue estimate for its fiscal 2023 f reflects a 23.2% rise from the prior year.

Analysts expect DDL’s EPS for its fiscal year 2023 to increase 78.4% year-over-year. The company’s EPS is expected to increase 3.7% per annum over the next five years. However, its EPS is expected to remain negative at least until fiscal 2023.

Looks Undervalued

In terms of its forward EV/Sales, DDL is trading at 0.34x, which is 81% lower than the 1.81x industry average. The stock’s 0.33 forward Price/Sales multiple  is 74.3% lower than the 1.27 industry average.

Bleak Profit Margins

DDL’s 16.86% gross profit margin is 50.59% lower than the 34.13% industry average. Its negative 36.90% net income margin  is substantially lower than the 5.26% industry average. The stock’s negative 147.63% and negative 61.33% respective ROTC and ROA compare with their 7.14% and 4.91% industry averages.

POWR Ratings Reflect Uncertainty

DDL has an overall C rating, which equates to neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

DDL has a Sentiment grade of C, which is in sync with its mixed analyst sentiments. The stock also has a C grade for Momentum, which is justified because it is currently trading above its 50-day Moving Average of $4.99 but below its 200-day Moving Average of $16.87.

The stock is ranked #23 among 71 stocks in the F-rated Internet industry.

Click here to see the additional POWR Ratings for DDL (Growth, Value, Stability, and Quality).

Bottom Line

DDL’s total revenue increased 72% year-over-year in its last reported quarter due to robust growth in its GMV, but its bottom line remained negative. Furthermore,  analysts expect its EPS to remain negative at least until fiscal 2023. Thus, I think it could be wise to wait for its margins to improve and its return to profitability before investing in the stock.

How Does Dingdong (Cayman) Limited (DDL) Stack Up Against its Peers?

While DDL has an overall POWR Rating of C, one might consider looking at its industry peers, trivago N.V (TRVG), which has an overall A (Strong Buy) rating, and Yelp Inc. (YELP) and Travelzoo (TZOO), which have an overall B (Buy) rating.

Note that TRVG is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

DDL shares were trading at $5.21 per share on Wednesday afternoon, down $0.09 (-1.70%). Year-to-date, DDL has declined -67.78%, versus a -6.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

More Resources for the Stocks in this Article