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When Can We Expect A Profit From Youdao, Inc. (NYSE:DAO)?

With the business potentially at an important milestone, we thought we'd take a closer look at Youdao, Inc.'s (NYSE:DAO) future prospects. Youdao, Inc., an internet technology company, provides online services in the field of content, community, communication, and commerce in China. With the latest financial year loss of CN¥721m and a trailing-twelve-month loss of CN¥594m, the US$429m market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Youdao's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Youdao

Consensus from 8 of the American Consumer Services analysts is that Youdao is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of CN¥100m in 2025. So, the company is predicted to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 91% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
earnings-per-share-growth

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

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One thing we would like to bring into light with Youdao is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

There are too many aspects of Youdao to cover in one brief article, but the key fundamentals for the company can all be found in one place – Youdao's company page on Simply Wall St. We've also put together a list of relevant aspects you should further research:

  1. Valuation: What is Youdao 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 Youdao 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 Youdao’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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.