EnerSys (ENS) and Microvast Holdings, Inc. (MVST) are popular electric vehicle battery manufacturers. ENS manufactures, markets, and distributes industrial batteries and related products like chargers, power equipment, and battery accessories. It also provides related after-market and customer-support services for lead-acid industrial batteries. On the other hand, MVST develops and manufactures lithium-ion battery solutions for electric vehicles and energy storage systems. It also develops battery components, such as cathode, anode, electrolyte, and separator.
In an effort to tackle climate change and carbon emissions, President Biden has included provisions for clean energy in his proposed infrastructure bill. His administration also announced the goal to make up electric vehicle sales to be 50% of total car sales by 2030. This should benefit EV battery stocks ENS and MVST. The global electric vehicle battery market is expected to grow at 6.6% CAGR and reach $82.20 billion by 2027.
While MVST lost 10.3% over the past month, ENS lost 13.6%. But which of these stocks is a better pick now? Let’s find out.
Latest Developments
On September 13, 2021, ENS expanded its ODYSSEY battery brand portfolio to include products formerly sold under the NorthStar battery brand. ODYSSEY’s entire line of virtually maintenance-free batteries featuring proprietary Thin Plate Pure Lead (TPPL) technology provides reliable performance and long-lasting power for Automotive/Truck, Powersports, Marine, Recreational Vehicles (RVs), Heavy Duty, and Fleet Vehicles. ENS expects to witness high demand in the upcoming months.
In an announcement dated July 27, 2021, MVST and eVersum, a high-tech vehicle OEM engaged in building commercial electric vehicles for passenger transport, will jointly develop state-of-the-art battery solutions to electrify the current and future line eVersum’s “eBorn” electric vehicles. In the long run, the serial products for eVersum will be manufactured in MVST’s European factory.
Recent Financial Results
ENS’ net sales for its fiscal first quarter ended July 4, 2021, increased 15.6% year-over-year to $814.90 million. The company’s adjusted operating earnings came in at $75.10 million, up 22.7% from the prior-year period. While its adjusted net earnings increased 38.1% year-over-year to $54.40 million, its adjusted EPS increased 35.9% to $1.25.
For its fiscal second quarter ended June 30, 2021, MVST’s revenues increased 53.8% year-over-year to $33.37 million. The company’s gross loss came in at $6.77 million, compared to a profit of $3.55 million in the prior-year period. Its loss from operations came in at $22.34 million, up 244.5% from the year-ago period. MVST’s net loss of $27.07 million for the quarter represents a 244.5% rise from the prior year period.
Expected Financial Performance
ENS’ EPS is expected to increase 14.5% year-over-year in the current year and 23.2% next year. Its revenue is expected to grow 8.3% year-over-year in the next year.
In comparison, MVST’s EPS is expected to remain negative in the current year and next year. Its revenue is expected to improve 79.1% year-over-year in the next year.
Valuation
In terms of non-GAAP forward PEG, ENS is currently trading at 14.37x, compared to MVST’s negative 41.10x. In terms of forward EV/Sales, MVST’s 22.57x compares with ENS’ 1.17x.
Profitability
ENS’ trailing-12-month revenue is 24.3 times what MVST generates. ENS is also more profitable, with an 11.3% EBITDA margin versus MVST’s negative value.
Also, ENS’ ROE and ROTC values of 10.4% and 6% compare with MVST’s negative values.
POWR Ratings
While MVST has an overall D grade, which translates to Sell in our proprietary POWR Ratings system, ENS has an overall B grade, equating to Buy. The POWR Ratings are calculated considering 118 different factors, each weighted to an optimal degree.
In terms of Value, ENS has been graded a B, in sync with its lower-than-industry valuation ratios. ENS’ 1.17x forward EV/Sales is 38.7% lower than the 1.91x industry average. However, MVST’s D grade for Value reflects its overvaluation. The company has a 22.57x forward EV/Sales, 1080.9% higher than the industry average of 1.91x.
ENS has a B grade for Sentiment, which is consistent with favorable analyst estimates. Analysts expect ENS’ EPS to grow 14.5% year-over-year in the current year to $5.14. However, MVST’s D grade for Sentiment is in sync with analysts’ expectation that its EPS will remain negative for the current year.
Of the 92 stocks in the B-rated Industrial - Equipment industry, MVST is ranked #77, while ENS is ranked #21.
Beyond what we’ve stated above, our POWR Ratings system has also rated ENS and MVST for Growth, Stability, Momentum, and Quality. Get all MVST ratings here. Also, click here to see the additional POWR Ratings for ENS.
The Winner
Rising demand for efficient and cheap EV batteries should benefit ENS and MVST in the upcoming quarters. However, relatively lower valuation and higher profitability make ENS a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Industrial - Equipment industry.
ENS shares were unchanged in after-hours trading Friday. Year-to-date, ENS has declined -7.46%, versus a 17.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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