In this piece, I have evaluated two auto stocks, Rivian Automotive, Inc. (RIVN) and Netherlands-based Stellantis N.V. (STLA), to determine which could generate better returns. Based on a comprehensive evaluation of these stocks, I believe that STLA presents a promising investment opportunity for the reasons outlined in this article.
With rising demand for both personal and commercial vehicles and an increasing consumer focus on safety and environmental concerns, the auto industry is well-positioned for robust growth in the foreseeable future.
Moreover, the electric vehicle (EV) industry is at the heart of the worldwide push toward a more sustainable future. As countries work towards reducing their carbon footprints, the demand for EVs is expected to increase aggressively.
In addition, over time, the automotive parts aftermarket experienced steady growth and transformation. Mass production techniques and globalization contributed to increased availability and affordability of aftermarket parts.
As a result, the global automotive market is expected to grow to $28.70 billion by 2030 at a CAGR of 4.5%.
STLA is a clear winner in terms of price performance, with a 38% gain over the past nine months compared to RIVN’s 17.7% decline. Moreover, STLA has gained 44.1% over the past year, while RIVN has plunged 20.5%.
Here are the reasons why we think STLA could perform better in the near term:
Recent Developments
On June 26, 2023, RIVN announced that Amazon.Com (AMZN) had unveiled its new custom electric delivery vans in Europe, developed in collaboration with the company.
The new vans from RIVN, along with the expansion of micro-mobility hubs across European cities, will help AMZN deliver even more packages in zero-emission vehicles.
On June 21, RIVN announced the acquisition of Swedish mapping company Iternio, developer of the ‘A Better Routeplanner’ (ABRP) app. ABRP is an industry leader in EV trip planning and has a strong community of EV drivers in both North America and Europe.
RIVN and Iternio will continue to maintain and improve ABRP as a stand-alone app for drivers of any EV, as well as integrating ABRP’s technology into RIVN’s in-vehicle navigation system and newly available trip planning experience in the RIVN mobile app.
Conversely, on June 27, 2023, STLA launched Free2move Charge, a 360-degree ecosystem that will seamlessly deliver charging and energy management to address all electric-vehicle (EV) customer needs, anywhere and in any way.
Managed by the new Stellantis Charging & Energy Business Unit, Free2move Charge addresses electric-vehicle customers’ needs at home, at work, and on the go.
On June 26, STLA announced a strategic partnership with Utilimaster, a leading go-to-market brand of The Shyft Group’s Fleet Vehicles & Services business unit, as they expand their services into Mexico.
Recent Financial Results
During the fiscal first quarter that ended March 31, 2023, RIVN’s revenue came in at $661 million. Gross profit decreased 6.6% year-over-year to negative $535 million, whereas net loss came in at $1.35 billion and net loss per share attributable to Class A and Class B common stockholders came in at $1.45.
On the contrary, during the fiscal year ended December 31, 2022, STLA’s net revenues increased 20.2% year-over-year to €179.59 billion ($198.65 billion). Its operating income rose 32.3% from the prior-year period to €20.01 billion ($22.13 billion). The company’s net profit increased 18.1% year-over-year to €16.78 billion ($18.56 billion). Also, its EPS came in at €5.31, representing an increase of 17.7% year-over-year.
Past and Expected Financial Performance
RIVN’s total assets have increased at a CAGR of 89.4% over the past three years. Its revenue is expected to increase 147.8% this year, 169.8% in the about-to-be-reported quarter ended June 2023, and 124.5% in the current quarter. Moreover, its EPS is expected to amount in negative in the to-be-reported quarter, current quarter, and current year.
Conversely, over the past three years, STLA’s revenue grew at a 44.9% CAGR. Also, its EPS grew at a 39.6% CAGR during the same period. Analysts expect STLA’s revenue to rise 7.6% this year. Its EPS is expected to grow by 2.3% in the current year.
Valuation
In terms of trailing-12-month P/S, STLA is currently trading at 0.29x, lower than RIVN, which is trading at 5.90x. STLA’s forward EV/Sales multiple of 0.17 is lower than RIVN’s 3.96.
Thus, STLA is relatively more affordable.
Profitability
STLA is more profitable, with a trailing-12-month gross profit margin of 19.66% compared to RIVN’s negative 141.91%. In addition, STLA’s trailing-12-month net income margin of 9.35% compares to RIVN’s negative 292.63%.
Furthermore, STLA’s trailing-12-month ROCE, ROTC, and ROTA of 26.27%, 13.88%, and 9.02% compared to the RIVN’s negative 41.98%, 23.42%, and 35.78%, respectively.
POWR Ratings
RIVN has an overall rating of F, translating to a Strong Sell in our proprietary POWR Ratings system. Conversely, STLA has an overall rating of A, which equates to a Strong Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. RIVN has an F grade for Value. RIVN’s forward EV/Sales and P/S multiples of 3.96 and 5.90 are 231.9% and 553.5% higher than the 1.19 and 0.90 industry averages.
In contrast, STLA has an A grade for Value. STLA’s forward EV/Sales and P/S multiples of 0.17 and 0.29 are 85.8% and 68.3% lower than the 1.19 and 0.90 industry averages.
Among the 55 stocks in the Auto & Vehicle Manufacturers industry, RIVN is ranked #49, while STLA is ranked #8.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Momentum, Stability, Quality, and Sentiment. Click here to view RIVN ratings. Get all STLA ratings here.
The Winner
The automotive industry is poised for strong growth in the coming years due to the increasing demand for both personal and commercial vehicles and a growing consumer emphasis on safety and environmental considerations.
Additionally, the automotive parts aftermarket has grown steadily over time, with mass production and globalization making aftermarket parts more accessible and affordable. Industry players such as RIVN and STLA are expected to capitalize on the industry tailwinds.
However, given RIVN’s relatively weak financial performance, low profitability, and elevated valuation multiples, its competitor STLA emerges as a more favorable investment choice.
Our research shows that the 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.
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STLA shares were trading at $18.54 per share on Tuesday morning, up $0.03 (+0.16%). Year-to-date, STLA has gained 30.56%, versus a 19.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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