The demand for electric vehicles (EVs) has been increasing, with the governments globally taking measures to transition their nations to zero-emission transportation. As a result, the demand for EV batteries has also been growing rapidly. According to an Emergen Research report, the global EV battery market is expected to reach $46.80 billion by 2027.
However, EV production continues to be hamstrung by the global semiconductor chip shortage, making the EV battery industry’s near-term growth prospects bleak. While governments have been taking steps to ameliorate the situation, and companies have been ramping up production to meet the growing demand for semiconductors, it is widely held that the current chip shortage will persist.
So, even though the EV battery industry could grow significantly in the long term, some stocks in this sector—for example pace, Microvast Holdings, Inc. (MVST), Romeo Power, Inc. (RMO), and Flux Power Holdings, Inc. (FLUX)—have seen the price of their shares outrun their intrinsic values. So, we think it could be wise to avoid these names now.
Microvast Holdings, Inc. (MVST)
MVST designs, develops, and manufactures battery systems for EVs and energy storage systems. The Stafford, Tex., company offers a range of cell chemistries, such as lithium titanate oxide, lithium iron phosphate, and nickel manganese cobalt version 1 and 2. Also, its commercial vehicle markets include buses, trains, mining trucks, marine and port applications, and automated guided and specialty vehicles.
MVST’s revenue increased 53.8% year-over-year to $33.37 million for its fiscal second quarter, ended June 30, 2021. However, its gross loss was $6.77 million, versus a$3.55 million gross profit in the prior-year period. In addition, the company’s loss from operations increased 244.5% year-over-year to $22.34 million, while its net loss increased 244.5% year-over-year to $27.07 million.
In terms of forward P/S, MVST’s 20.37x is 1,238.1% higher than the 1.52 industry average. Likewise, the stock’s 25.46 forward EV/S is 1,263.9% higher than the 1.87x industry average.
For its fiscal year 2022, MVST’s revenue is expected to increase 79.1% year-over-year to $257.07 million. However, analysts expect its EPS to remain negative in fiscal 2021 and 2022. The stock has lost 15.2% in value over the past month to close yesterday’s trading session at $9.73.
MVST’s poor prospects are apparent in its POWR Ratings also. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Sentiment, and a D grade for Growth and Value. Click here to see the additional POWR ratings for MVST (Quality, Momentum, and Stability). It is ranked #80 of 91 stocks in the Industrial – Equipment industry.
Romeo Power, Inc. (RMO)
RMO in Vernon, Calif., designs and manufactures lithium-ion battery modules and packs for commercial EVs. The company operates through two segments: Romeo Power North America and Joint Venture Support. In addition, it offers battery modules, battery packs, and battery management system technologies.
Several law firms have launched an investigation into RMO and certain of its officers and directors on potential violations of the Securities Exchange Act of 1934. It is alleged that the company misrepresented its ability to meet product demand.
For the second quarter, ended June 30, 2021, RMO’s revenue decreased 18% year-over-year to $926 million. Its operating loss increased 456.7% year-over-year to $29.72 million, while its net loss increased 308.2% to $28.67 million. The company’s loss per share increased 144.4% year-over-year to $0.22.
In terms of forward P/S, RMO’s 34.64x is 2,175.6% higher than the 1.52x industry average. The stock’s 19.84x forward EV/S is 962.9% higher than the 1.87x industry average.
Analysts expect RMO’s revenue to increase 398.6% year-over-year to $102.07 million in its fiscal year 2022. However, the company’s EPS is expected to remain negative in fiscal 2021 and 2022. The stock has lost 78.9% in price year-to-date to close yesterday’s trading session at $4.75.
RMO’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Growth, Stability, and Sentiment, and a D grade for Value and Quality.
Flux Power Holdings, Inc. (FLUX)
FLUX designs, develops, manufactures, and sells rechargeable lithium-ion energy storage systems for electric forklifts, airport ground support equipment, and other industrial motive applications in the United States. It also offers a battery management system that provides cell balancing, monitoring, and error reporting functions for battery systems. FLUX is based in Vista, Calif.
Levi & Korsinsky launched an investigation into FLUX in March 2021 on concerns about whether the company had breached its fiduciary duty.
FLUX’s revenue increased 38% year-over-year to $6.96 million for its fiscal third quarter, ended March 31, 2021. However, its operating loss came in at $2.97 million, versus a $3.46 million loss in the prior-year period. In addition, its net loss was $1.72 million compared to a $3.96 million loss in the year-ago period, while its loss per share came in at $0.14 compared to a $0.78 loss in the prior year quarter.
In terms of forward P/S, FLUX’s 3.68x is 141.6% higher than the 1.52x industry average. Likewise, the stock’s 109.1% forward EV/S is 109.1% higher than the 1.87x industry average.
The company’s revenue is expected to increase 33.7% year-over-year to $34.19 million in its fiscal year 2022. However, analysts expect FLUX’s EPS to remain negative in fiscal 2021 and 2022. The stock has lost 58.8% in price year-to-date to close yesterday’s trading session at $7.10.
FLUX’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which translates to a Sell in our proprietary rating system. In addition, it has an F grade for Quality, and a D grade for Value.
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MVST shares were trading at $9.65 per share on Wednesday afternoon, down $0.08 (-0.82%). Year-to-date, MVST has declined -43.57%, versus a 20.49% 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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