Nio Looks Like a Bargain and Here's the Honest Answer on Whether to Buy

Nio (NYSE: NIO), a leading electric vehicle maker in China, looks dirt cheap relative to its growth potential. Analysts expect its revenue to rise 47% in 2026 and 16% in 2027, yet it trades at less than one times next year's sales. They also expect its earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive in 2026 and rise 35% in 2027. But based on its enterprise value, it trades at just 12 times next year's EBITDA.

As of this writing, Nio's stock still trades slightly below its 2018 IPO price of $6.26 per ADR. Let's see why investors shunned Nio's stock -- and if it's a good contrarian investment.

Image source: Nio.

Why is Nio's stock trading at such low valuations?

Nio produces a wide range of electric sedans and SUVs. It differentiates itself from its competitors with swappable batteries, which can be quickly swapped out at its battery-swapping stations as a faster alternative to conventional chargers. Its new Onvo and Firefly sub-brands sell cheaper SUVs and compact cars, respectively. It's also been expanding into Europe.

Nio's annual vehicle deliveries surged from 43,728 in 2020 to 326,028 in 2025. During those five years, its revenue grew at a 40% CAGR, from 16.3 billion yuan to 87.5 billion yuan ($12.8 billion). However, its net loss widened from 5.6 billion yuan to 15.6 billion yuan ($2.3 billion) as it scaled up its business. In 2020, Nio nearly went bankrupt before a government-backed investor group invested $1 billion in the company. Its critics claimed that the investment was a bailout.

Nio's steep losses drove it to take on more debt, which boosted its debt-to-equity ratio from 0.8 at the end of 2020 to 15.5 at the end of 2025. It still faces intense competition from other EV makers across China's crowded market. That pressure could limit its pricing power and ability to narrow its net losses and reduce its debt. The trade war between the U.S. and China is also exacerbating that pressure by driving investors away from smaller Chinese companies.

Could Nio's stock be a turnaround play?

Over the past year, Nio's vehicle deliveries accelerated as its vehicle margins expanded. That growth was fueled by the rising popularity of its namesake sedans and Onvo SUVs in China, the rollout of its new Firefly vehicles, and its ongoing expansion in Europe. It also turned profitable for the first time in the fourth quarter of 2025, but analysts don't expect it to stay in the black this year.

Nio's stock will remain under pressure as long as it keeps burning cash, diluting its investors (its share count has risen nearly 60% in the past five years), and taking on more debt. But if you expect economies of scale to kick in as its deliveries keep rising, it could be worth nibbling on today. However, investors shouldn't expect its unloved stock to bounce back anytime soon.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.