Electric vehicle (EV) company XPeng Inc. (XPEV) operates as a designer, developer, manufacturer, and seller of smart EVs in China. Its offerings include SUVs under the G3 name, four-door sports sedans under the P7 name, and smart EVs and family sedans under the P5 name. The company is headquartered in Guangzhou, China.

XPEV sold 9,002 smart EVs in April 2022, which indicates a 75% year-over-year increase. However, the company is still navigating the COVID-19-induced supply chain disruptions. XPEV’s chief executive officer He Xiaopeng has said that Chinese automakers might have to suspend their May productions if Shanghai-based suppliers are not able to resume operations due to the lockdowns in the country.

Over the past six months, XPEV’s stock has declined 48.6% to close Friday’s trading session at $24.61. It has lost 51.1% year-to-date and 15.7% over the past month. However, it has gained 1.7% over the past five days and 2.2% intraday.

Here is what could shape XPEV’s performance in the near term.

Click here to checkout our Electric Vehicle Industry Report for 2022

Bleak Bottom Line

For the fiscal fourth quarter ended December 31, XPEV’s total revenues increased 200.1% year-over-year to $1.34 billion. However, non-GAAP net loss rose 68.2% from the prior-year period to $188.04 million, while non-GAAP net loss per ADS came in at $0.22, up 48.4% from the same period the prior year.

Analysts Expect EPS To Decline

The consensus EPS estimate of a negative $0.28 for the quarter ended March 2022 indicates a 100% year-over-year decrease. Likewise, the consensus EPS estimate for the quarter ending June 2022 of a negative $0.29 reflects a decline of 31.8% from the prior-year quarter.

Moreover, analysts expect XPEV’s EPS to decrease 31.7% year-over-year to a negative $1.08 for the fiscal year 2022. The company’s EPS is expected to decline 8.7% per annum over the next five years.

Stretched Valuations

In terms of its forward EV/Sales, XPEV is currently trading at 2.43x, 117.8% higher than the industry average of 1.12x. The stock’s forward Price/Sales multiple of 3.28 is 246.9% higher than the industry average of 0.95. In terms of its forward Price/Book, the stock is trading at 4.33x, 78.2% higher than the industry average of 2.43.

Negative Profit Margins

XPEV’s trailing 12-month gross profit margin and levered FCF margin of 12.66% and 1.77% are 65.05% and 61.93% lower than their respective industry averages of 36.23% and 4.66%. Its trailing 12-month EBITDA margin and net income margin of a negative 28.92% and 23.17% are substantially lower than their respective industry averages of 12.68% and 6.61%.

Its trailing 12-month ROE, ROTC, and ROA of a negative 12.70%, 9.96%, and 7.41% compare with their respective industry averages of 17.45%, 7.71%, and 6.09%.

POWR Ratings Reflect Bleak Prospects

XPEV’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.

XPEV has a Value grade of D, consistent with its stretched valuations. The stock has a D grade for Quality, in sync with its lean profit margins. It also has a Growth grade of D, which is justified by its bleak bottom-line growth in its last reported quarter.

In the 69-stock Auto & Vehicle Manufacturers industry, XPEV is ranked #51. The industry is rated F.

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

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

Bottom Line

XPEV’s weak bottom line and negative ROE are concerning. Moreover, its current valuation does not justify its underlying fundamentals. On top of it, the COVID-19 lockdowns in China could worsen the supply chain issues. Thus, we think it might be best to avoid XPEV now.

How Does XPeng Inc. (XPEV) Stack Up Against its Peers?

While XPEV has an overall POWR Rating of F, one might consider looking at its industry peers, Isuzu Motors Limited (ISUZY) and Volkswagen AG (VWAGY), which have an overall B (Buy) rating.

XPEV shares were trading at $25.13 per share on Monday morning, up $0.52 (+2.11%). Year-to-date, XPEV has declined -50.07%, versus a -12.47% 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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