With a $626.14 million market cap, Mullen Automotive, Inc. (MULN - Get Rating) is an electric vehicle (EV) manufacturer and distributor. The company owns and runs businesses such as CarHub, which uses AI to give a user-friendly way to buy, sell, and own a car, and Mullen Energy, which sells battery technology and emergency point-of-care solutions.

On December 14, MULN announced that it had received a purchase order, valued at approximately $200 million, for 6,000 Class 1 EV cargo vans from Randy Marion Automotive Group (RMA).

This announcement closely followed MULN’s announcement of signing the group as its first U.S. dealer partner to offer sales, service, and parts for the company’s commercial lineup covering Class 1-6 EV cargo vans and trucks.

However, MULN’s stock has lost 91.7% over the past year to close the last trading session at $0.38, below its 200-day moving average of $0.86. Despite the slump, it is still trading at a trailing-12-month Price/Book multiple of 9.83, 366.3% above the industry average of 2.11.

Given the challenging macroeconomic climate amid increasing interest rates, let’s closely examine the factors that could put further pressure on the stock.

Weak Financials

For the fiscal 2022 third quarter ended June 30, 2022, MULN’s loss from operations widened 184.5% year-over-year to $18.22 million. During the same period, its net loss worsened by 289.9% year-over-year to $59.47 million, which translated to a $0.16 loss per share.

Inefficient Asset Utilization by Management

MULN’s trailing 12-month return on total capital (ROTC) of negative 618.14% is strikingly lower than the industry average of 6.59%. Likewise, the company’s trailing 12-month return on total assets (ROTA) of negative 169.94% compares unfavorably to the industry average of 4.45%.

POWR Ratings Reflect Fundamental Weakness

MULN’s overall F rating translates to a Strong Sell in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MULN also has an F grade for Value and Stability, in sync with its stretched valuation and substantial spread between its 52-week high and low prices of $4.39 and $0.18, respectively.

In addition, MULN has a D grade for Quality and Sentiment, consistent with poor profitability and bearishness in stock price action.

Unsurprisingly, MULN is ranked #57 of 64 stocks in the Auto & Vehicle Manufacturers industry.

Click here to see additional POWR Ratings for Growth and Momentum for MULN.

Bottom Line

In addition to the factors listed above, MULN is yet to declare the results of the fiscal 2022 fourth quarter, which ended September 30. Moreover, in an increasing interest rate environment, a slowdown in commercial vehicle sales risks adding to the losses and prolonging its financial underperformance.

Hence, MULN appears to be a falling knife with significantly greater downside risks than upside potential.

How Does Mullen Automotive, Inc. (MULN) Stack up Against Its Peers?

MULN has been rated F, equating to a Strong Sell. You may check out these other stocks within the Auto & Vehicle Manufacturers industry with an A (Strong Buy) rating: Suzuki Motor Corporation (SZKMY - Get Rating), Subaru Corporation (FUJHY - Get Rating), and Isuzu Motors Limited (ISUZY - Get Rating).

MULN shares were trading at $0.40 per share on Wednesday afternoon, up $0.02 (+6.25%). Year-to-date, MULN has gained 39.86%, versus a 3.11% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

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