These 3 Companies Currently Provide Much Better Value Than Nio

A recent article I saw online discussed how Citron Research’s Andrew Left believes Nio (NYSE:NIO) is no longer a good investment, despite the fact he first recommended the Chinese electric vehicle manufacturer in November 2018 when it was trading around $7. 

A Nio (NIO) sign outside of the company's facilities in Shanghai, China.
Source: Andy Feng / Shutterstock.com

“While we commend Baillie Gifford (love those people) and early investors, right now we are looking at a share structure and an investor base that is more interested in spinning a casino wheel,” quoted Benzinga

As someone who has gone from a complete skeptic to an unabashed fan over the course of 2020, I too find Nio’s valuation has gotten out of hand. 

Nio Stock Isn’t Cheap

When I last wrote about Nio on Oct. 22, I suggested to readers that it wasn’t too late for buy-and-hold investors to get it on China’s growing EV market. At the time, it was trading at 25 times sales. It’s now trading at 42 times sales.

That’s what happens when your share price moves 70% higher in less than a month’s trading. So, yes, Left isn’t off his rocker pointing out that the Nio story has gotten ahead of itself. 

If you’re a buy-and-hold investor, I wouldn’t sell at this point, but I wouldn’t recommend you buy some more until the stock falls back into the $30s. And if Nio’s volatility is anything like Tesla’s (NASDAQ:TSLA) has been over the years, you ought to have an opportunity or two in the next 12 months.

In the meantime, here are X stocks to buy whose market capitalization is around Nio’s at $63 billion, is growing, but trades for much less than 42 times sales.

Gaming Remains Hot

Activision Blizzard (NASDAQ:ATVI) has had a good year in the markets with a total return of 30.5% year-to-date through Nov. 17. 

In December 2019, I wondered if the creator of the Call of Duty and World of Warcraft video game franchises could get to $80. At the time, it was trading around $54. And while I liked ATVI stock in the long-term and believed it would ultimately get to $80, I didn’t think that would happen until 2021. 

Well, as I write this, there are approximately six weeks left in the year, and it’s trading around $77. On several occasions in 2020, it’s traded over $80, reaching a 52-week high of $87.73 in August. So, technically, I’m already wrong. 

Trading at a little less than eight times sales and growing revenues by 26% in the first nine months of its current fiscal year, Activision Blizzard provides much better value right now.  

Regeneron Continues to Be an InvestorPlace Favorite  

Sure, Regeneron (NASDAQ:REGN) isn’t getting the glamorous press clippings that Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) are, but it’s doing just fine with its Covid-19 treatment that helped President Trump recover from the virus. 

However, as Bret Kenwell suggested recently, Regeneron’s work with Sanofi (NASDAQ:SNY) on Dupixent, an anti-inflammatory treatment for all kinds of issues including asthma, atopic dermatitis, and many more, ought to deliver future growth once the Food and Drug Administration approves it for commercial use. 

Kenwell points out that its earnings over the next two years are expected to grow by more than 20%, while sales will grow by 7% in 2020 and 20% in 2021. 

Yet, Regeneron trades for less than seven times sales and 14 times its forward earnings. 

This Discounter Continues to Grow

Dollar General’s (NYSE:DG) business is booming. That’s reflected in its stock price, which is currently up almost 35% year to date, including dividends.

On Nov. 17, the company announced that it doubled its appreciation bonuses for front-line employees working in its 16,720 stores in 46 states. That brings its front-line bonuses to $100 million in the third and fourth quarters and $173 million for 2020 in its entirety. 

“Customers continue to look to and trust Dollar General to carry the essential household items on which they depend, all while furthering our mission of Serving Others,” Chief Executive Officer Todd Vasos stated. “Our dedicated store, distribution and private fleet teams continue to work diligently to meet our customers’ needs, especially as we see increased demand and stock-up behaviors.”

These are awards that all front-line workers should be getting as the second wave hits America this winter. 

Trading at 1.7 times sales, slightly higher than its five-year average, Dollar General continues to deliver sales and earnings that are higher than usual due to Covid-19. While that’s not always going to be the case, it’s got an excellent track record of growth in good times and bad.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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