Romeo Power Inc. (RMO) is a Vernon, Calif.-based global pioneer in energy technology that provides innovative electrification solutions for complicated commercial vehicle applications. The company's superior battery-electric product portfolio and its revolutionary battery management system provide customers with safety, performance, dependability, and configurability.
The company's shares are down 90.1% in price over the past year and 77.2% year-to-date, closing its last trading session at $0.83. In addition, the stock is currently trading 92.3% below its 52-week high of $10.74.
While the broader market sell-off has weighed largely on the stock's price performance, multiple senior management changes this year have added to the investors’ bearish sentiment concerning the stock.
Here is what could shape RMO's performance in the near term:
Inadequate Financials
RMO's revenue increased significantly year-over-year to $11.57 million for the first quarter, ended March 31, 2022. However, its operating loss grew 249.9% from its year-ago value to $82.04 million. The company reported a $81.11 million net loss compared to $92.10 million in net income in the first quarter of 2021. Its loss per share amounted to $0.60 over this period. In addition, its net cash used in operating activities came in at $40.03 million, representing a 65.6% increase for the three months ended March 31, 2022.
Negative Profit Margins
RMO's 0.08% trailing-12-month asset turnover ratio is 89.5% lower than the 0.80% industry average. Its trailing-12-month cash from operations stood at negative $209.44 million compared to the $179.10 million industry average. Also, its trailing-12-month ROA, gross profit margin, and ROC are negative 56.9%, 129.1%, and 45.5%, respectively.
Poor Earnings Estimates
The Street expects RMO's EPS to decline 36.4% in the current quarter (June 2022) and 69.2% next quarter (ending Sept. 30, 2022). In addition, its EPS is expected to decline 1542.9% and remain negative in the current year. Furthermore, the company failed to top the Street’s EPS estimates in three of the trailing four quarters.
POWR Ratings Reflect Bleak Outlook
RMO 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. RMO has an F grade for Stability and Quality. The stock’s 1.09 beta is consistent with the Stability grade. In addition, the company's poor profitability is in sync with the Quality grade.
Among the 69 stocks in the C-rated Auto Parts industry, RMO is ranked #67.
Beyond what I have stated above, one can view RMO ratings for Growth, Value, Momentum, and Sentiment here.
Bottom Line
RMO's deteriorating bottom-line performance and poor profitability have raised investors' concerns over its prospects. In addition, the stock is currently trading below its 50-day and 200-day moving average of $1.21 and $3.11, respectively, indicating a downtrend. So, we think the stock is best avoided now.
How Does Romeo Power Inc. (RMO) Stack Up Against its Peers?
While RMO has an overall F rating, one might want to consider its industry peers, Ituran Location & Control Ltd. (ITRN) and Genuine Parts Co. (GPC), which have an overall A (Strong Buy) rating.
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RMO shares were trading at $0.86 per share on Tuesday afternoon, up $0.03 (+3.30%). Year-to-date, RMO has declined -76.44%, versus a -12.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
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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