How Profitable is Full Truck Alliance Co.?

Does mid-cap Software company Full Truck Alliance Co. have a sustainably profitable business model? By studying its gross margins and comparing them to its operating margins, we can gain insight into quality of its business. With gross margins at 45.5%, you might be telling yourself the Full Truck Alliance Co. is profitable — but there is more to the story.

Gross margins take into account only the cost of revenue, meaning the expenses directly related to each sale. So it's important to also look at operating margins, which take into account overhead costs. One way to look at it is that gross profit gives insight into Full Truck Alliance Co.'s market and the viability of its business model. Operating margins, on the other hand, show you how efficiently the company is implementing this business model.

Date Reported Revenue ($ MM) Cost of Revenue ($ MM) Gross Margins (%) YoY Growth (%)
2021-12-31 4,657 2,540 45.46 -7.24
2020-12-31 2,581 1,316 49.01 11.89
2019-12-31 2,473 1,390 43.8 n/a

Since Full Truck Alliance Co.'s cost of revenue is growing at an average 43.8% per year, while its total revenues have a 42.4% growth rate, the only explanation for the widening margins is that the company is increasing its prices. Since prices cannot be increased indefinitely, Full Truck Alliance Co.'s gross margin growth will eventually slow unless it can get its cost of revenue under control.

Date Reported Total Revenue ($ MM) Operating Expenses ($ MM) Operating Margins (%) YoY Growth (%)
2021-12-31 4,657 5,913 -81.51 41.8
2020-12-31 2,581 4,879 -140.06 -239.37
2019-12-31 2,473 2,104 -41.27 n/a

The table above tells us that, on average, Full Truck Alliance Co. has not been profitable over the last four years, which should be a warning sign to prospective investors. Indeed, the company's operating margins are sinking at rate of -98.8%

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.