Automaker Rivian Automotive, Inc. (RIVN - Get Rating) operates as a designer, developer, and manufacturer of electric vehicles and accessories. The company’s offerings include five-passenger pickup trucks and sports utility vehicles.

RIVN produced 4,401 electric vehicles during the second quarter, roughly doubling production quarter-to-quarter. This brings the total number of vehicles produced to 7,969 since production started last year. The company also expects to achieve 25,000 annual productions this year.

However, RIVN’s stock has declined 69.5% year-to-date and 20.9% over the past three months to close its last trading session at $31.63. However, it is up 6.4% over the past month and 22.8% over the past five days.

Here are the factors that could affect RIVN’s performance in the near term:

Bleak Financials

For the fiscal first quarter ended March 31, RIVN generated $95 million in revenues. However, its gross profit came in at a negative $502 million. Loss from operations rose 285.1% from the prior-year quarter to $1.58 billion, while its net loss came in at $1.59 billion, up 284.8% from the same period the prior year.

Negative Profit Margins

RIVN’s trailing-12-months ROE of a negative 69.53% is significantly lower than the industry average of 17.02%. Moreover, its trailing-12-months ROTC and ROA of a negative 28.22% and 27.55% compare to their respective industry averages of 7.13% and 5.63%.

Lofty Valuations

In terms of its forward EV/Sales, RIVN is trading at 7.44x, 600.7% higher than the industry average of 1.06x. The stock’s forward Price/Sales multiple of 15.55 is 1,741.7% higher than the industry average of 0.84.

POWR Ratings Reflect Bleak Prospects

RIVN’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

RIVN has a Value and Quality grade of F in sync with its stretched valuations and negative profitability margins. The stock also has a D grade for Growth, consistent with its bleak growth in the last reported quarter.

In the 66-stock Auto & Vehicle Manufacturers industry, it is ranked #65. The industry is rated F.

Click here to see the additional POWR Ratings for RIVN (Momentum, Stability, and Sentiment).

View all the top stocks in the Auto & Vehicle Manufacturers industry here.

Bottom Line

Although the company reported robust production results in the last quarter, its widening losses are concerning. Moreover, given its negative ROE, I think the stock might be best avoided now.

How Does Rivian Automotive, Inc. (RIVN) Stack Up Against its Peers?

While RIVN has an overall POWR Rating of F, one might consider looking at its industry peers, Honda Motor Co., Ltd. (HMC - Get Rating) and Isuzu Motors Limited (ISUZY - Get Rating), which have an overall B (Buy) rating.

RIVN shares were trading at $31.93 per share on Friday afternoon, up $0.30 (+0.95%). Year-to-date, RIVN has declined -69.21%, versus a -17.83% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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