Boston-based XL Fleet Corp. (XL) is a hybrid electric vehicle designer and developer for the commercial and public vehicle markets in the United States and Canada. XL Fleet turns internal combustion engines into plug-in hybrid electric cars. It also intends to release a fully electrical conversion solution in the near term. 

However, because automakers have failed to meet the demand for EVs due to supply chain constraints and a semiconductor chip shortage, the company has so far failed to achieve its anticipated growth.

Closing yesterday's trading session at $3.27, the stock is currently trading near its 52-week low of $3.07, indicating a downtrend. In addition, concerns over the global chip shortage’s effect on the EV industry may further contribute to investors' concerns about the stock’s future price performance. And given the stock's steep valuation and weak financials, XL could be a risky bet.

Click here to checkout our Electric Vehicle Industry Report for 2022

Here is what could influence XL's performance in the upcoming months:

Inadequate Financials

XL's revenue declined 49.4% year-over-year to $3.2 million for the third quarter, ended Sept. 30, 2021. Its operating loss grew 150% from its year-ago value to $15.27 million. And the company's net loss surged 230.7% from the prior-year quarter to $7.53 million, while its loss per share increased 66.7% year-over-year to $0.05.

Weak Profitability

XL's 15.89% trailing-12-months gross profit margin is 55.9% lower than the 35.9% industry average. Also, its ROC, EBIT margin, and Levered FCF margin are negative 13.6%, 216.9%, and 174.4%, respectively. And its trailing-12-month cash from operations stood negative at $41.01 million, versus the $183.7 million industry average.

Premium Valuation

In terms of forward EV/Sales, the stock is currently trading at 0.29x,which is 85.9% lower than the 2.03x industry average. And its 1.8x forward Price/Book is 45.9% lower than the 3.32x industry average. Moreover, RAD's forward 0.03x Price/Sales is 97.3% lower than the 1.42x industry average.

POWR Ratings Reflect Uncertainty

XL has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. XL has a D grade for Value and Quality. The company's negative profit margins and higher than industry valuation are consistent with these grades.

Of the 65 stocks in the C-rated Auto Parts industry, XL is ranked #63.

Beyond what I have stated above, one can view XL ratings for Stability, Growth, Momentum, and Sentiment here.

Bottom Line

XL's stock has declined 17.2% in price over the past month and is currently trading below its 50-day and 200-day moving average of $4.53 and $6.36, respectively, reflecting bearish investor sentiment. Furthermore, given a slowdown in its operational performance, its growth prospects look uncertain. So, we believe the stock is best avoided now.

How Does XL Fleet Corp. (XL) Stack Up Against its Peers?

While XL has an overall F rating, one might want to consider its industry peers, Genuine Parts Company (GPC), LKQ Corporation (LKQ), and Standard Motors Products Inc. (SMP), which have an overall B (Buy) rating.

Click here to checkout our Electric Vehicle Industry Report for 2022

XL shares were trading at $3.25 per share on Wednesday morning, down $0.02 (-0.61%). Year-to-date, XL has declined -1.81%, versus a 0.44% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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