Charge Up Your Portfolio with EVgo

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By the decade’s end, half of the cars manufactured will be electric vehicles. Furthermore, it’s expected that all cars manufactured in the next 15-20 years will be electric. 

And while Tesla is currently the King of EVs. There are several picks and shovel companies that can get you EV exposure. 

One of those firms is EVgo (EVGO). The company has more than 850 fast charging stations. And it’s more than tripling in size over the next five years making it America’s largest public EV fast charging network.

Although it doesn’t garner the same search volume as Blink Charging (BLNK), shares have been on a tear recently, gaining more than 50% in a matter of weeks.

Does that make this charging network stock an easy pick?

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EVgo’s Business

EVgo, Inc. (EVGO) owns and operates electric vehicle charging stations. The company offers charging solutions to businesses and fleet charging. EVgo has managed to strike partnerships with automakers like Nissan, BMW, GM, along with Tesla, Kia, Hyundai, and KIA. Furthermore, it has partnered with local governments to provide charging solutions.

The beauty behind its fast charging stations is it takes 14-45 minutes to fully charge an EV.  

Over the last three months EVGO has made deals with Delta Electronics, the South Jersey Transportation Authority, City of Philadelphia, and General Motors. 

Approximately 140 million Americans are within 10 miles of an EVgo charger. And the firm has around 444,000 customers in over 30 states. 

EVGO generates most of its revenues from retail customers using its charging stations.

Financials

EVGO reported record quarterly earnings in Q2 2022, hitting $9 million, more than double what it did in Q2 2021 when it did $4.7 million. However, its operating income went from -$17.5 million in Q2 2021 to -$37 million in Q2 2022 as it expanded operations. 

Furthermore, its normalized EBITDA went from -$12.4 million in Q2 2021 to  -$32.9 million in Q2 2022. 

EVGO is not a profitable company yet, and its operating cash flow (ttm) is negative at -$66.6 million.

However, during its most recent quarter, the firm held $372 million in cash, with total debt of $32.77 million, while boasting a market cap of $3.13 billion. 

That left the company with a current ratio of 6.15x, which means it has plenty of liquid assets to cover its short-term liabilities.

Valuation

EVGO’s valuation is pretty brutal. The company has a price-to-sales ratio of 26.59x.

The company projects it will hit revenues between $48 million to $55 million. However, its market cap is north of $3 billion. And its revenues per share is tiny 0.44x (ttm). 

To make matters worse, the  firm doesn’t generate positive cash flow from operations.

Profitability

EVGO has a gross profit margin of 31.8%, which is significantly better than its competitors Chargepoint (CHPT) 20%, and Blink Charging (BLNK) 21.6%. And while all three companies are far from profitable. EVGO is not doing as bad as CHPT and BLNK.  Either way, it’s hard to get excited about a negative return on equity, negative net income margin, negative cash from operations, and a negative return on assets. 

Growth

EVGO has grown its revenue by 80% (YoY), which is what investors need to see more of for the company to grow into its valuation. While BLNK grew its revenues by more (YoY), EVGO has better margins and is owned by more institutional investors. 

Our Opinion 7/10

Why would we be hot on a stock that loses money?

By the decade’s end, half of the cars manufactured will be electric. And within 15-20 years, we’ll produce only electric cars. 

Clearly, this bodes well for EVGO. And while its current valuation is insane. The demand for its products and services should continue to increase over time. Which means it can grow into its valuation. 

EV stocks are hot right now, but we would be long-term buyers of EVGO on any dips. Shares are up 64% over the last month, so it’s worth being patient and waiting for the right buying opportunity. 

We think this is a great speculative play given the dominant market share and partnerships.