Pinduoduo Inc.'s (NASDAQ:PDD) Path To Profitability

Pinduoduo Inc. (NASDAQ:PDD) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Pinduoduo Inc., through its subsidiaries, operates an e-commerce platform in the People's Republic of China. With the latest financial year loss of CN¥7.0b and a trailing-twelve-month loss of CN¥7.6b, the US$207b market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Pinduoduo's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

See our latest analysis for Pinduoduo

Pinduoduo is bordering on breakeven, according to the 36 American Online Retail analysts. They expect the company to post a final loss in 2021, before turning a profit of CN¥8.7b in 2022. Therefore, the company is expected to breakeven just over a year from today. 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 54% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

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We're not going to go through company-specific developments for Pinduoduo given that this is a high-level summary, however, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one aspect worth mentioning. The company has managed its capital prudently, with debt making up 29% 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:

This article is not intended to be a comprehensive analysis on Pinduoduo, so if you are interested in understanding the company at a deeper level, take a look at Pinduoduo's company page on Simply Wall St. We've also compiled a list of essential aspects you should further examine:

1. 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.

2. 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.

3. 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. 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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