Wessling, Germany-based aerospace start-up Lilium N.V. (LILM) is a maker of an all-electric vertical take-off and landing (eVTOL) jet. It recently signed a memorandum of understanding with NetJets Inc. and FlightSafety International for a proposed strategic partnership, which is expected to boost its commercial ambitions in Florida and other U.S. markets and create additional direct sales opportunities.

However, LILM is struggling with poor profitability. The stock has declined 48.4% in price over the past three months and 62.3% over the past six months to close yesterday’s trading session at $4.04.

In addition, it is currently trading 65.4% below its 52-week high of $11.66, which it hit on September 22, 2021.

Here is what could influence LILM’s performance in the upcoming months:

Ongoing Investigations

A law firm is investigating potential claims against LILM and certain of its officers and/or directors on concerns regarding whether it has engaged in securities fraud or other unlawful business practices. It is alleged that many experts have raised serious doubts about the viability of the company’s Lilium Jet reaching its objective of flying distances of up to 155 miles.

Low Profitability

In terms of the trailing-12-month asset turnover ratio, LILM’s 0% compares with the 0.78% industry average. Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA are negative compared to the 13.76%, 6.83%, and 5.15% industry averages.

Stretched Valuation

In terms of trailing-12-month EV/S, LILM’s 16.78Kx is significantly higher than the 1.93x industry average. Likewise, its 13.37x trailing-12-month P/B is 400.9% higher than the 2.67x industry average. Furthermore, the stock’s 4.41x  trailing-12-month P/S  is 196.5% higher than the 1.49x industry average.

POWR Ratings Reflect Bleak Prospects

LILM has an overall D rating, which equates to a Sell in our POWR Rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. LILM has a D grade for Quality, in sync with its lower-than-industry profitability ratios.

The stock has a D grade for Value, which is consistent with its higher-than-industry valuation ratios. In addition, LILM has a D grade for Growth. This is justified because  analysts expect its EPS to remain negative in the current year.

LILM is ranked #65 of 73 stocks in the Air/Defense Services industry. Click here to see more of LILM’s component grades.

Bottom Line

LILM is currently trading below its 50-day and 200-day moving averages of $4.33 and $7.98, respectively, indicating a downtrend. Furthermore,  it could keep retreating in the near term due to concerns over the Iceberg Research report, which estimates the company has about 18 months before it runs out of cash. Because the stock looks overvalued at its  current price level, we think it best to avoid it now.

How Does Lilium N.V. (LILM) Stack Up Against its Peers?

While LILM has an overall POWR Rating of D, one might want to consider investing in the following Air/Defense Services stocks with an A (Strong Buy) or B (Buy) rating: Moog Inc. (MOG.A), Ducommun Incorporated (DCO), and Lockheed Martin Corp. (LMT).

LILM shares were trading at $4.21 per share on Friday morning, up $0.17 (+4.21%). Year-to-date, LILM has declined -39.25%, versus a -4.45% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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