Based in Wolfsburg, Germany, Volkswagen AG (VWAGY) manufactures and sells automobiles primarily in Europe, North America, South America, and the Asia-Pacific. The company operates in four segments: Passenger Cars and Light Commercial Vehicles; Commercial Vehicles; Power Engineering; and Financial Services.

On the other hand, technology and automotive company Lucid Group, Inc. (LCID) develops electric vehicle (EV) technologies. The company designs, engineers, and builds electric vehicles, EV powertrains, and battery systems.

The lingering chip shortage is continuing to hinder operations in the EV industry. However, EV demand is increasing. According to a national survey by AAA, 77% of Americans want their next vehicle purchase to be an EV.

Mark Jenkins, the spokesman of AAA, said, “Although it may cost more money upfront, EVs cost less to charge, maintain, and are more efficient.” Furthermore, according to Maximize Market Research, the global electric vehicle market is estimated to grow at a CAGR of 21.7% from 2022 to 2029.

Such solid prospects in the EV industry should drive significant growth for VWAGY and LCID.

VWAGY has lost 7.3% over the past month, while LCID has lost 23.2%. VWAGY has lost 47.7% over the past year and 37.5% year-to-date, while LCID has lost 18.8% over the past year and 60.2% year-to-date.

Which stock is a buy? Let’s find out.

Latest Developments

On July 28, 2022, VWAGY’s CFO, Arno Antlitz, said, “Despite unprecedented global challenges, Volkswagen has demonstrated remarkable financial robustness. The volume group has proven that it can deliver good results even in a challenging environment.”

On the other hand, on June 24, 2022, LCID officially opened its first retail location in the Pacific Northwest at University Village in Seattle, WA. Also, on June 17, 2022, LCID announced the official opening of its first Studio location in Denver, CO. However, these new openings might not yield immediate gains for the company.

Recent Financial Results

VWAGY’s sales revenue increased 2% year-over-year to €132.28 billion ($132.09 billion) for the first half ended June 30, 2022. Its earnings after tax came in at €10.64 billion ($10.62 billion), up 25.8% year-over-year, while its EPS came in at €20.51, up 27.1% year-over-year.

LCID’s revenue increased 55,840.2% year-over-year to $97.34 million for the second quarter that ended June 30, 2022. However, its loss from operations came in at $559.20 million, up 124.7% year-over-year. Also, its net loss came in at $555.27 million, up 112.2% year-over-year.

Past and Expected Financial Performance

VWAGY’s revenue has increased at a 2.4% CAGR over the past five years. Analysts expect VWAGY’s revenue to increase by 7.8% year-over-year in 2023. The company’s EPS is expected to grow 5.1% per annum over the next five years.

On the other hand, LCID’s revenue is expected to increase by 2,722.8% year-over-year in 2022 and 286.9% in 2023. Its EPS is expected to grow 76% year-over-year in 2022 and 11% in 2023. However, its EPS is estimated to decline 69.4% per annum for the next five years.

Profitability

VWAGY’s 18.21% gross profit margin is higher than LCID’s negative 281.59%. Also, VWAGY’s ROE, ROA, and ROTC of 11.50%, 0.03%, and 3.73%, compare with LCID’s negative 73.72%, 0.30%, and 35.66%, respectively.

Thus, VWAGY is more profitable.

Valuation

In terms of forward EV/S, VWAGY is currently trading at 0.92x, lower than LCID’s 30.56x. In addition, VWAGY’s trailing-12-month Price to Book ratio of 0.43x is 93.7% lower than LCID’s 6.83x.

Thus, VWAGY is a relatively affordable stock here.

POWR Ratings

VWAGY has an overall rating of A, equating to Strong Buy in our proprietary POWR Ratings system. On the other hand, LCID has an overall rating of F, which translates to Strong Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

VWAGY has an A grade for Value. Its forward P/S of 0.27x is 68.8% lower than the industry average of 0.87x. On the other hand, LCID has an F grade for Value. Its forward P/S of 33.24x is 3,754.2% higher than the industry average of 0.86x.

In addition, VWAGY has an A grade for Sentiment, consistent with favorable analysts’ expectations. On the other hand, LCID has a C grade for Sentiment, in sync with mixed analysts’ expectations.

Of the 65 stocks in the Auto & Vehicle Manufacturers industry, VWAGY is ranked #2. On the other hand, LCID is ranked #51.

Beyond what we’ve stated above, we have also rated the stocks for Growth, Momentum, Stability, and Quality. Click here to view VWAGY ratings. Get all LCID ratings here.

The Winner

Both VWAGY and LCID should benefit from the industry tailwinds. However, VWAGY’s robust profitability and attractive valuations make it a better Buy.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturers industry here.

VWAGY shares were trading at $19.10 per share on Tuesday morning, up $0.85 (+4.66%). Year-to-date, VWAGY has declined -32.85%, versus a -16.91% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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