What are we looking for?
Electric vehicle manufacturers anticipated to grow faster than Tesla Inc.
The screen
Last month, Tesla stock hit a year-to-date low, down roughly 40 per cent since the start of the year. This came amid a 10-per-pent global work force layoff, a Cybertruck recall, and missed first-quarter revenue targets. Adding fuel to the fire, there have been recent conflicting reports on the future of Tesla’s Supercharger division, which oversees its network of charging stations. Two weeks ago, the company reportedly laid off most of the team. However, last Friday, Elon Musk posted on social media platform X that the company is investing “well over $500 M” to expand its charging network this year. Now, new reports suggest Tesla is reversing the cuts and rehiring Supercharger employees.
Tesla is no stranger to turbulence, but this environment poses a great opportunity for competitors to increase their share of the U.S. market. We identified companies that are well-positioned for growth in the EV space using FactSet’s universal screening tool and by applying the following parameters:
- Traded on a U.S. exchange
- Existing revenue exposure to the U.S. according to FactSet’s proprietary geographic revenue exposure algorithm
- Market capitalization greater than US$100-million
- Classified in the “alternative energy car manufacturers” subindustry group, according to FactSet
- Forecast sales growth of more than 20 per cent for 2024 by sell-side analysts
We ranked the five remaining companies by a multifactor ranking of its EPS, EV/EBITDA ratio, price-to-sales ratio, as well as its projected sales and EPS growth for 2024.
More about factset
FactSet is a leading global financial data and technology company. FactSet’s superior suite of content, analytics and workflow services covers the entire portfolio lifecycle and offers actionable insights for asset managers and investment professionals around the world.
What we found
While our screen is open to other alternative energy car manufacturers (e.g., fuel cell, natural gas, propane, and biofuel), all five companies passing our criteria are electric vehicle manufacturers. Notably, Tesla did not meet our screening parameters owing to its low anlayst-projected revenue growth of 2.5 per cent. This slowing sales growth provides ample opportunity for other industry players to seize market share.
BYD Company BYDDY, an EV manufacturer based in China, ranked first in our screen with a projected sales and EPS growth of 25.3 per cent and 16.7 per cent respectively. Notably, the company also had the lowest price-to-sales ratio in our screen (1.0), suggesting its stock is currently undervalued. According to Counterpoint Research, the company surpassed Tesla in global EV market share last year owing to an increase of EV sales in China, a region where BYD is a dominant market leader. With continued growth, it would be a next step for the auto maker to consider entering the U.S. electric car market. BYD currently manufactures and delivers electric buses in the U.S. and could benefit from economies of scale The company on Tuesday launched its first hybrid pick-up truck, the BYD Shark.
Polestar PSNYW-Q, an EV manufacturer based in Sweden, ranked second in our screen with a projected sales growth of 89.8 per cent. Notably, the company also had a forecast EPS growth of 19.7 per cent, the highest among companies passing our screen. Earlier this year, Volvo announced it will be reducing its stake in the company, because of missed delivery targets. According to a press release from Polestar, a portion of Volvo’s ownership will be handed over to Geely, Polestar’s parent company. Although this could place further downward pressure on the company’s balance sheet in the short run, analysts anticipate significant growth in their revenues next year. Investors can tune in to Polestar’s upcoming earnings call on March 23 for more details on its long-term strategy.
Christine Elegado is a consultant at FactSet Canada.
Disclaimer: The information in this article is not investment advice. FactSet assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained above.