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Market Sentiment Around Loss-Making Waterdrop Inc. (NYSE:WDH)

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·3 min read
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  • WDH

We feel now is a pretty good time to analyse Waterdrop Inc.'s (NYSE:WDH) business as it appears the company may be on the cusp of a considerable accomplishment. Waterdrop Inc. provides online insurance brokerage services to match and connect users with related insurance products underwritten by insurance companies in the People’s Republic of China. With the latest financial year loss of CN¥1.1b and a trailing-twelve-month loss of CN¥1.4b, the US$1.5b market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is Waterdrop's path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Waterdrop

Waterdrop is bordering on breakeven, according to the 5 American Insurance analysts. They expect the company to post a final loss in 2022, before turning a profit of CN¥303m in 2023. So, the company is predicted to breakeven approximately 2 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 68% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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

Underlying developments driving Waterdrop's growth isn’t the focus of this broad overview, but, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one aspect worth mentioning. Waterdrop currently has no debt on its balance sheet, which is quite unusual for a cash-burning growth company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Waterdrop which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Waterdrop, take a look at Waterdrop's company page on Simply Wall St. We've also compiled a list of essential factors you should further examine:

  1. Historical Track Record: What has Waterdrop's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Waterdrop'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. 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.

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

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