Youdao, Inc. (NYSE: DAO)

Sector: Consumer Defensive Industry: Education & Training Services CIK: 0001781753
Market Cap 1.09 Bn
P/B -3.90
P/E 71.71
P/S 1.30
ROIC (Qtr) -864.03
Div Yield % 0.00
Rev 1y % (Qtr) 21.10
Total Debt (Qtr) 259.01 Mn
Debt/Equity (Qtr) -0.92
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About

Youdao, Inc., a Chinese company listed on the NASDAQ stock exchange under the ticker symbol DAO, operates primarily in the online education and training services industry. The company offers a diverse range of educational resources, software, and hardware products to students, parents, and educators, both within China and internationally. Youdao's primary business activities revolve around providing online education and training services, as well as developing and selling educational software and hardware products. The company's offerings include...

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Investment thesis

Bull case

  • R&D investment of 73.04M represents healthy 0.61x of deferred revenue 120.41M, indicating strong future innovation pipeline.
  • Cash reserves of 62.74M provide comfortable 10.15x coverage of tax obligations 6.18M, showing strong fiscal management.
  • Strong tangible asset base of 264.93M provides 16.96x coverage of intangibles 15.62M, indicating robust asset quality.
  • Cash reserves of 62.74M exceed inventory value of 20M by 3.14x, indicating strong liquidity and inventory management.
  • R&D investment of 73.04M represents significant 1.35x of receivables 54.15M, indicating innovation-driven growth.

Bear case

  • Investment activities of 0 provide weak support for R&D spending of 73.04M, which is 0x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • High receivables of 54.15M relative to inventory of 20M (2.71 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating cash flow of 0 provides insufficient coverage of deferred revenue obligations of 120.41M, which is 0x, raising concerns about future service delivery capabilities.
  • Operating cash flow of 0 provides minimal 0x coverage of tax expenses of 2.36M, suggesting potential tax planning inefficiencies or unsustainable tax positions.
  • Tangible assets of 264.93M provide limited backing for working capital of (172.22M), which is -1.54x, suggesting increased operational risk in market downturns.

Peer comparison

Companies in the Education & Training Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 EDU New Oriental Education & Technology Group Inc. 9.35 Bn 24.58 1.82 0.78 Bn
2 TAL TAL Education Group 6.18 Bn 22.22 2.20 0.38 Bn
3 GHC Graham Holdings Co 5.47 Bn 12.27 1.91 1.17 Bn
4 LAUR Laureate Education, Inc. 5.20 Bn 25.55 3.29 0.44 Bn
5 LOPE Grand Canyon Education, Inc. 4.62 Bn 21.85 4.23 0.11 Bn
6 LRN Stride, Inc. 3.61 Bn 11.32 1.43 0.56 Bn
7 ATGE Covista Inc. 3.46 Bn 13.66 1.83 0.73 Bn
8 PRDO PERDOCEO EDUCATION Corp 2.84 Bn 42.39 1.73 0.06 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.40 0.71
EV to Cash from Ops. EV/CFO -11.98 6.80
EV to Debt EV to Debt 0.43 11.15
EV to EBIT EV/EBIT 4.20 112.78
EV to EBITDA EV/EBITDA 4.58 6.48
EV to Free Cash Flow [EV/FCF] EV/FCF -10.29 5.57
EV to Market Cap EV to Market Cap 0.10 582,173.64
EV to Revenue EV/Rev 0.13 1.74
Price to Book Value [P/B] P/B -3.90 -3.80
Price to Earnings [P/E] P/E 71.71 -1.70
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 11.73
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.21
Dividend per Basic Share Div per Share (Qtr) 0.00 0.25
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 1.69
Interest Coverage Int. cover (Qtr) 2.97 53.05
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 0.00 -82.12
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -23.19 25.11
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.54
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 11.67 -39.04
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 0.00 -34.79
EBIT Growth (1y) % EBIT 1y % (Qtr) 20.15 -40.70
EBT Growth (1y) % EBT 1y % (Qtr) 45.67 -52.53
EPS Growth (1y) % EPS 1y % (Qtr) 0.00 -29.51
FCF Growth (1y) % FCF 1y % (Qtr) 0.00 -36.51
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -1.27 -3.42
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.42 0.63
Cash Payout Ratio Cash Payout Ratio 0.00 0.01
Cash Ratio Cash Ratio (Qtr) 0.15 0.73
Current Ratio Curr Ratio (Qtr) 0.59 1.63
Debt to Equity Ratio Debt/Equity (Qtr) -0.92 3.83
Interest Cover Ratio Int Coverage (Qtr) 2.97 53.05
Times Interest Earned Times Interest Earned (Qtr) 2.97 53.05
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 0.00 -30.62
EBIT Margin % EBIT Margin % (Qtr) 22.27 -82.13
EBT Margin % EBT Margin % (Qtr) 2.10 -47.07
Gross Margin % Gross Margin % (Qtr) 44.30 50.48
Net Profit Margin % Net Margin % (Qtr) 1.80 -48.61