Electric vehicles are taking the automobile industry by storm. While new companies are emerging, China is the largest EV market due to government support. NIO Ltd. (NIO) and Niu Technologies (NIU) are two of the fastest-growing EV manufacturers and are gaining market share through their innovative products at affordable prices.
While NIO is known for its aggressive growth as it readily expands to high demand economies in North America and Europe, NIU’s electric motorcycles and bicycles cater to the middle-income population looking for compact vehicles at affordable prices. As the pandemic has resulted in a disdain toward public transportation, NIU’s sales are expected to skyrocket both in the domestic and international markets.
Both companies have generated significant returns over the past year. NIO gained 2547.5% over this period, while NIU returned 300.1%. In terms of past six-month performance as well, NIO is the clear winner with 1213% gains versus NIU’s 238.6% returns.
But which stock is a better buy now? Let’s find out.
NIO recently raised $1.30 billion through an American depository share offering, which is expected to contribute to the research and development of electric car ecosystems and automated technologies as well as developing its global market presence. It also plans to buy back some of its shares from the Hefei investor group, which previously bailed out the company with a $1.40 billion cash infusion. The company is currently planning to expand to the European EV market.
NIO is the first company to launch a ‘battery as a service’ (BaaS) subscription model, allowing customers to purchase electric vehicles and battery packs separately. It is planning to launch its EVs in the European market by 2021. NIO aims to penetrate the most important global markets across the world by 2023 – 2024, according to CEO William Li.
NIU operates four series of e-scooters, two series of urban commuter electric motorcycles, and a performance bicycle series. The company launched a new e-bicycle model GO earlier this year in compliance with the new National Standard of Electric bicycle in China.
Recent Financial Results
NIO’s total revenues increased 146.4% year-over-year to RMB4.53 billion in the third quarter ended September 2020. Vehicle sales grew 146.1% from the same period last year to RMB 4.27 billion. Gross profit rose significantly over this period to RMB 585.80 billion, compared to a negative year-ago value. NIO delivered 5,055 vehicles in October, up 100.1% from the same period last year.
NIU e-scooters sales volume increased by 67.9% year-over-year to 250,889 in the third quarter ended in September 2020. This can be attributed to a 70.2% increase in e-scooter sales in China and a 6.3% growth in the international markets. NIU’s e-commerce sales grew 43.2% year-over-year in the first three-quarters of 2020 to 451,187 units.
NIU enjoys a dominating market share in China, with total e-bicycle GO sales accounting for 27.6% of the total China market volume over this quarter.
Past and Expected Financial Performance
NIO’s revenue grew 48.2% year-over-year, while NIU’s revenue grew 14.5% over the same period.
NIO’s EPS is expected to grow 64.1% in the current quarter (ending December 2020), 53.3% in the current year, and 38.6% next year. Analysts expect NIO’s revenue to increase 121.9% in the current quarter, 113.6% in the current year, and 90.3% next year.
Comparatively, NIU’s EPS is expected to increase 23.1% in the next quarter (ending December 2020), 20.5% in the current year, and 78.7% next year. Revenue is expected to grow 57.9% in the next quarter, 38.7% in the current year, and 68.3% next year.
NIO’s trailing 12-month revenue is 6.29 times what NIU generates. However, NIU is more profitable with a gross margin of 23.6% compared to NIO’s 3.8%.
In terms of trailing 12-month Price/Sales, NIO, currently trading at 28.57x, is 67.9% more expensive than NIU, which is currently trading at 9.17x. NIO is also more expensive in terms of trailing 12-month EV/Sales (35.38x versus 8.76x).
Thus, NIU is a more affordable stock here.
NIU is rated “Strong Buy” in our proprietary POWR Ratings system, while NIO is rated “Buy”. Here’s how the four components of overall POWR Rating are graded for both these stocks:
NIU has an “A” for Trade Grade, Buy & Hold Grade and Peer Grade, and “B” for Industry Rank. It is currently ranked #10 out of 30 stocks in the Technology – Hardware industry.
NIO has an “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade and Industry Rank. In the 115-stock China group, NIO is currently ranked #3.
NIO’s growth over the past quarter has caught the eye of investors worldwide, many of whom have dubbed the company as “the Tesla of China.” While the company demonstrates impressive earnings and revenue growth potential, it is substantially overvalued concerning its last reported financials. NIO has a debt to equity ratio of 68.69, compared to NIU’s 21.18. All these factors establish NIO as a risky investment venture, despite its impressive track record. With high market volatility amid the ongoing pandemic disruption, NIU’s relatively safer earnings potential at a lower valuation makes it a better buy.
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NIO shares were trading at $50.02 per share on Friday morning, up $1.57 (+3.24%). Year-to-date, NIO has gained 1,144.28%, versus a 12.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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