Kandi Technologies Group, Inc. (KNDI) and Arcimoto, Inc. (FUV) are two of the fastest emerging electric vehicle designers and manufacturers worldwide. KNDI commercializes electric vehicle products and parts and off-road vehicles in the People's Republic of China and internationally, while Eugene, Oregon-based FUV sells three-wheeled electric vehicles. Its portfolio of EVs include Fun Utility Vehicle, Rapid Responder, and Deliverator for the delivery of goods.
Growing concerns around climate change have led many governments to begin trying to wean consumers and companies off fossil fuels and to promote the adoption of sustainable energy usage. With that, the development of battery-powered electric vehicles has taken on some urgency. Both KNDI and FUV seem all set to tap the anticipated long-term EV boom, based on the significant development progress they have made so far.
While KNDI has returned 46.4% over the past year, FUV gained 792.2%. In terms of past six-month performance, FUV is the clear winner with 238.9% gains versus KNDI’s 100% returns. But which of these stocks is a better pick now? Let’s find out.
Latest Movements
KNDI has been facing several securities fraud class action lawsuits, filed by Jakubowitz Law, Pomerantz Law Firm, the Klein Law Firm, and others, on behalf of the company’s shareholders.
On November 24, the company announced the closing of 8.85 million units of a registered direct offering, which generated $100 million in proceeds. KNDI intends to use the proceeds for general working capital purposes and expenditures necessary to ensure the development of EV models that comply with all necessary requirements for the entry into the U.S. market.
On December 14, FUV announced a nationwide expansion plan by opening the state of Florida for customer reservations. The move marked a significant milestone in the company’s expansion; it expects to begin the deliveries in the first quarter of 2021.
On November 20, FUV announced the sale of approximately 1.13 million shares of its common stock. The company expects to raise approximately $15 min proceeds from the offering, which it intends to use for general corporate purposes, and to aid its production process.
Recent Financial Results
In the third quarter, ended September 30, 2020, KNDI’s revenue declined 40.9% year-over-year to $18.70 million, due primarily to slower sales of EV parts because of reduced demand from customers due to the effects of the COVID-19 pandemic.
KNDI’s off-road vehicle sales have increased 51.6% from the year-ago value to $8.90 million, while its electric vehicle parts sales decreased by 67.4% to $8.4 million over this period. Its gross margin of 20.9% increased 42 basis points from the prior-year quarter.
FUV’s total revenue has increased 1,953.1% year-over-year to $683,895 in the third quarter that ended September 30, 2020. The company’s production vehicles increased 138.6% from the year-ago value to 136 vehicles in the third quarter. EPS improved 31.8% from the same period last year.
Here FUV is in an advantageous position.
Past and Expected Financial Performance
KNDI’s revenue grew at a CAGR of 11.3% over the past three years. The company’s total assets declined at a CAGR of 7.7% over this period.
Analysts expect the company’s revenue to increase 76.7% next year.
In contrast, FUV’s revenue and total assets have grown at a CAGR of 295.6% and 19.1%, respectively, over the past three years.
Analysts expect the company’s revenue to increase 613.6% next year.
FUV has an edge over KNDI here as well.
Profitability
KNDI’s trailing-12-month revenue is 42.37 times FUV’s. Moreover, KNDI is more profitable with a gross profit margin of 20.2% versus FUV’s negative values.
Valuation
In terms of trailing-12-month Price/Sales, FUV is currently trading at 151.83x, much more expensive than KNDI, which is currently trading at 3.59x. FUV’s trailing-12-month Price-to-Book of 18.93x is also much higher than KNDI’s 1.75x.
In terms of trailing-12-month EV/Sales, FUV’s 183.05x is much higher than KNDI’s 4.95x.
Though FUV looks much more expensive compared to KNDI, we think it is worth paying this premium considering FUV’s significantly higher revenue growth potential.
POWR Ratings
KNDI is rated “Strong Sell” in our proprietary POWR Ratings system, while FUV is rated “Neutral”. Here are how the four components of overall POWR Rating are graded for KNDI and FUV:
KNDI has an “F” for Trade Grade and Buy & Hold Grade, and a “D” for Peer Grade and Industry Rank. In the 115-stock China group, it is ranked #78.
FUV has an “A” for Industry Rank, a “B” for Trade Grade, a “C” for Buy & Hold Grade, and a “D” for Peer Grade. It is ranked #26 of 34 stocks in the Auto & Vehicle Manufacturers industry.
The Winner
While KNDI is the relatively cheaper option to bet on the immense growth potential of the electric vehicle market, FUV’s current financials and revenue and earnings outlook are better than KNDI’s, making it the better pick here.
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FUV shares were trading at $14.06 per share on Tuesday afternoon, down $0.75 (-5.06%). Year-to-date, FUV has gained 773.29%, versus a 17.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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