Workhorse Group, Inc. (WKHS) and Hyliion Holdings Corp. (HYLN), which are prominent players in the electric vehicle (EV) space, have been gaining significant investor attention with climate change becoming a pressing concern and the world gradually going electric.
Both stocks generated significant returns over the past six months. While WKHS returned 760% over this period, HYLN has gained 145%. But which of these stocks is a better pick now? Let’s find out.
Business Structure and Latest Movements
WKHS designs, manufactures, and sells high-performance, drone-integrated electric vehicles to the last-mile delivery sector. The company’s products include medium-duty trucks comprising a powertrain and chassis. Over the past year, the company garnered approvals from all 50 states making it the only EV delivery company licensed for operations nationwide. It has recently begun production of its C-series electric step vans.
WKHS is one of three finalists for a $6.3 billion contract to supply the US Postal Services’ 165,000 vehicles. However, the decision has been delayed until the end of the calendar year. WKSH has a strategic alliance with tech-giant Hitachi group for an operational assessment of manufacturing, operational, and supply chain capabilities. Moreover, the company was included into the broad-market Russell 3000 Index in June.
HYLN designs, develops, and sells electrified powertrain solutions, particularly electrified powertrain solutions for Class 8 commercial vehicles. It provides battery management systems for hybrid and fully electric vehicle applications.
The company recently went public via a special purpose acquisition company (SPAC), through a merger with shell company, Tortoise Acquisition (SHLL), in a deal worth over $520 million. The company also recently announced a natural gas fueling partnership with American Natural Gas that also executed a pre-order agreement to purchase up to 250 Hypertruck ERX vehicles.
Recent Financial Results and Operational Highlights
In the third quarter that ended September 2020, WKHS recorded a top-line of $564,707, rising 522% sequentially. However, the company reported a loss of $0.78 per share, significantly improving from the quarter-ago loss of $1.76 per share.
WKHS has set a production volume target of 1,800 vehicles in 2021. It recently received a purchase order for 500 C-1000 trucks from Pritchard Auto Company for its National Fleet Program, which is being financed by Hitachi Capital. Moreover, late in October, the company submitted its application to the Federal Aviation Administration for its HorseFly Unmanned Aerial System drone.
HYLN has recorded zero revenues to date, but anticipates generating $1 million of revenue this year. The company reported a net loss of $2.77 million in the third quarter, compared to the quarter-ago loss of $2.26 million.
Its first 1,000-units pre-order comes from one of its strategic partners, Agility Logistics. The company installed eight hybrid electric units in the third quarter for four fleet-based customers. It also signed an agreement with FEV North America Inc. to accelerate commercialization of the Hypertruck ERX. However, the success of its ERX product is uncertain right now.
Here WKHS is in an advantageous position.
Past and Expected Financial Performance
WKHS’s revenue grew at a CAGR of 39.6% over the past five years. However, the company is not profitable yet. The market expects the company’s revenue to increase 72,400% in the current quarter, 449.1% in the current year, and 6,218.8% next year. WKHS’s EPS is expected to grow 79.5% next year.
On the other hand, HYLN has not generated any revenue to date and is consequently reporting losses each year. The market does not expect HYLN to report revenue in the current year. Moreover, the company’s EPS is expected to decline 24.8% next year.
WKHS has an edge over HYLN here as well.
WKHS’s trailing-twelve-month ROE of 603% compares favorably with HYLN’s negative value.
WKHS commands an enterprise value of $2.73 billion, a measure of a company’s total value, compared to HYLN’s $1.45 billion. However, in terms of current ratio, HYLN is more liquid with a ratio of 0.97 compared to WKHS’s 0.76, implying that the company doesn’t have enough liquid assets to cover its short-term liabilities.
Though HYLN is more liquid, it’s worth considering WKHS due to its significantly higher enterprise value.
While WKHS is rated “Neutral” in our proprietary POWR Ratings system, HYLN is a “Sell.” Here are how the four components of the POWRs Rating are graded for WKHS and HYLN:
WKHS has an “A” for Industry Rank, a “C” for Trade Grade and Buy & Hold Grade, and a “D” for Peer Grade. In the 33-stock Auto & Vehicle Manufacturers industry, it is ranked #26.
HYLN has a “C” for Industry Rank, a “D” for Trade Grade and Peer Grade, and an “F” for Buy & Hold Grade. It is ranked #18 in the 20-stock Trucking Freight industry.
EVs are increasingly gaining popularity over fuel-run cars due to the improved automotive performance and cost-efficiencies. While both WKHS and HYLN are good long-term investments, considering the unprecedented popularity of the EV market, WKHS appears to be a better choice based on the factors discussed here.
While both the companies have shown huge momentum this year, WKHS is already generating revenue and has begun the production of its electric step vans. With the growth of e-commerce, there is a need for more cost-effective delivery vehicles. WKHS’ long-term vision is to completely solve the “last-mile” problem and the company’s strategy on building electric delivery vehicles looks viable.
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WKHS shares were trading at $24.29 per share on Friday morning, up $1.51 (+6.63%). Year-to-date, WKHS has gained 699.01%, versus a 12.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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