YI

We rate 111, Inc. (YI) as a Hold with a composite score of 52.5/100 at a current price of $8.25. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (57th percentile) and momentum (51th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (29th percentile) and value (39th percentile) tempers our overall conviction. We assign a No Moat rating (30/100), High uncertainty, and Poor capital allocation.

Key items to watch: the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

111, Inc. holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 52.5/100 places it at rank #1612 in our full 7,333-stock universe. At $107M in market capitalization, 111, Inc. is a small-cap player in the Retail Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -6% combined with momentum at the 51th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 6% (-30.4pp vs sector) narrow to operating margins of 0% (-3.9pp vs sector) and net margins of -0.1%, yielding a gross-to-net conversion rate of -2%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $8.25, 111, Inc. is trading at a premium to fundamental value. Our value factor score of 39/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at EV/EBITDA of 3.1x (discounted to peers), P/S of 0.0x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a High uncertainty rating to 111, Inc.. Key risk factors include current negative profitability (net margin -0.1%), below-average price stability (29th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: current negative profitability (net margin -0.1%); below-average price stability (29th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 29th percentile and quality factor at the 57th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate 111, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (-6.3%), negative profitability, weak asset returns (ROA -3.0%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — 111, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, 111, Inc. receives a Hold rating with a composite score of 52.5/100 (rank #1612 of 7,333). Our quantitative framework assigns a No Moat (30/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 45/100.

Our analysis supports a neutral stance on 111, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.