Romeo Power, Inc. (RMO) and Panasonic Corporation. (PCRFY) are manufacturers of automotive-use batteries, lithium-ion battery modules and packs, as well as devices and systems for electric vehicles (EVs). While PCRFY shifted its attention from consumer electronics to EV battery packs after it entered into a partnership with Tesla, Inc. (TSLA) last year to produce a new, cheaper battery for the automaker, RMO provides primarily battery management systems and other engineering related services to commercial EVs in North America.
The EV industry has been growing at an exponential rate, fueled by many governments’ clean energy policies, including the Biden administration’s. Improving price parity with internal combustion vehicles and favorable programs to encourage consumers to buy battery-powered vehicles are also sector tailwinds. This rise in demand for EVs has in turn bolstered the demand for batteries that power these vehicles. With the increased use of improved and cost-effective lithium-ion batteries, companies such as RMO and PCRFY are well positioned to accelerate their growth.
Over the past year, PCRFY has gained 74.8%, while RMO returned 29.3%. In terms of year-to-date performance, RMO has lost 43.1%, but PCRFY has returned 11.7%. But which of these stocks is a better pick now? Let’s find out.
On April 6, RMO entered a long-term supply agreement with PACCAR—a technology leader in the manufacture and customer support of light-, medium- and heavy-duty trucks—to provide its battery management systems and packs for PACCAR’s battery EVs. With production anticipated to begin after 2021, ROM is expected to supply batteries through 2025 for Peterbilt 579 and 520 BEVs in the United States and Canada.
On April 1, 2021, PCRFY appointed Yuki Kusumi as the Chief Executive Officer. He has also been appointed as the President and Representative Director, which is expected to be confirmed at the company’s board of directors’ meeting scheduled for June 24, 2021.
Recent Financial Results
In the fourth quarter ended December 31, 2020, RMO’s product revenue decreased 53.5% year-over-year to $813 thousand. The company generated a gross loss of $5.47 million and an operating loss of $15.28 million over this period. Also, it reported a net loss of $19.08 million, compared to a net loss of $13.2 million in the prior-year quarter.
PCRFY’ operating profit from its automotive solutions segment improved from a year ago to a loss of 7.4 million yen, during the nine months ended December 31, 2020, driven primarily by fixed cost reductions and the introduction of new battery cells. The company’s net cash provided by operating activities was 330.1 billion yen, compared with 287.8 billion yen in the same period last year. Also, PCRFY’s net cash provided by financial activities was 50.3 billion yen over this period, compared with an outflow of 7 billion yen a year ago.
Expected Financial Performance
Analysts expect RMO’s revenue to increase 114.5% next year. The company’s EPS is estimated to increase 7.4% in fiscal 2021, and 4% next year.
In comparison, PCRFY’ revenue is expected to increase 6.2% in 2022. A consensus EPS estimate of $0.95 for 2022 represents a 50.8% improvement from the same period last year.
PCRFY has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. However, RMO has an overall F rating, which translates to Strong Sell. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
In terms of Growth Grade, PCRFY has a B, consistent with its expected growth in earnings and revenue over the past year. In comparison, RMO has a Growth Grade of D.
Also, in terms of Stability Grade, PCRFY has a B. In comparison, RMO has an F Stability Grade. While PCRFY has a Value Grade of A, given its lower-than-industry trailing-12-month ev/sales of 0.54x, RMO has a Value Grade of F, in sync with price-to-cash flow 76.41x versus 12.34x for the industry.
Beyond what we’ve stated above, our POWR Ratings system also rates PCRFY and RMO for Momentum, Sentiment, and Quality. Get the ratings for PCRFY here. Also, click here to see the additional POWR Ratings for RMO.
While PCRFY is in a solid position to generate long-term gains because of its superior financials and key partnerships, RMO’s weak financials and poor growth prospects could limit its opportunities over the long run. Hence, PCRFY appears to be a better buy based on the factors discussed here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. If you’re looking for other top-rated stocks in the Technology-Hardware industry, click here. Also, click here if you want to access the top-rated stocks in the Auto Parts industry.
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About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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