Traditional combustion engines are making way for new, greener alternatives. Governments worldwide have set targets, and auto manufacturers are working tirelessly to improve technologies. As of today, the leading renewable alternative is electric vehicles (EV).
From battery makers and auto parts companies to auto manufacturers and those focused on charging solutions, the supply chain is rapidly shifting to support the transition to EV. So which Canadian stocks are involved in these changes?
The question we get asked all the time, is how can investors get exposure to EV?
There are a multitude of ways to gain exposure to the EV industry. If one wants to capture the entirety of the supply chain, it may be best to target select ETFs that cover the industry as a whole.
On our Stocktrades Premium platform, we have talked extensively about our favorite auto parts manufacturer and those building up the infrastructure to support EV charging.
Today, we are going to focus on a sub-industry and talk about two leading bus manufacturers.
2 leading electric bus manufacturers
On the TSX Index, there are four leading bus/truck EV manufacturers. Those include the following:
NFI Group is one of the largest bus manufacturers in North America. The company is not a pure EV play like the other three, and EV is only expected to make up about 35-40% of its production until 2025.
For its part, Green Power Motors has had inconsistent revenue growth and has been largely dependent on California programs to support sales growth. The company has also been the target of short sellers, claiming some of their products are a direct copycat of some Chinese EV vehicles. Green Power Motors is the most volatile of the four and is currently one of the most expensive.
Given this, we are going to focus on two Canadian EV stocks which we believe have the most upside moving forward. Not that GP and NFI are bad companies, but the two below could take a lead in terms of revenue growth.
The top Canadian EV stocks for you to look at today
SPAC Merger - Lion Electric (LEV)
Lion Electric recently went public on both the NYSE and TSX via a Special Acquisition Corp (SPAC). Lion Electric has had mixed results and is down by approximately 13% since it first began trading. This is not all that surprising given that the EV industry is down from yearly highs.
As a newly listed company, investors have to dig a little deeper to get financial results and manually calculate valuation ratios. Our main focus of concern is revenue growth.
In the first quarter of Fiscal 2021, it’s first as a publicly listed company, revenue jumped to $6.2M which was up significantly from the $1.0M it posted in Q1 of 2020. Robust growth is expected to continue as analysts expect 415% revenue growth in 2021.
In fact, the expectation is for revenue to more than double in Fiscal 2022 and Fiscal 2023. When the merger was first announced the company had a backlog of 650 vehicles, and as of end of Q1, the order book stood at 817 vehicles and 76 charging stations.
Given the impressive growth rates and a forward valuation of 6.06 times next year’s sales, Lion Electric provides an attractive risk to reward ratio.
The more attractive microcap - Vicinity Motor Corp (TSEV:VMC)
With a market cap of ~$250M, Vicinity Motor (previously Grande West Transportation) is the smallest of the four mentioned previously. It is listed on the TSX Venture and as such, the company does carry additional risk and potential for volatility.
The company also isn’t as forthcoming with its order book. In fact, you’ll see the two largest companies like LEV and NFI Group delivering updates and providing a transparent order book. The same can’t be said for Green Power and Vicinity.
However, on its last conference call management did say it expects to reach $40M in sales in the first half of Fiscal 2021 and delivery of 150 buses in Fiscal 2021. This is a pretty significant jump from the 55 and 45 buses it delivered in Fiscal Year 2020 and 2019 respectively. Much of this is due to delayed COVID-19 orders/deliveries, but regardless it is shaping up to be a record year for the company.
It is also worth noting that Vicinity posted more than double the revenue of Green Power in both 2019 and 2020, and is on track yet again to out sell its peer in Fiscal 2021. Despite this, Vicinity trades at an unwarranted discount to Green Power despite similar expected growth rates, which is why it could potentially be a preferred microcap in the bus/truck EV subindustry.
2020 seemed to be a firecracker of a year for speculation causing highs and lows due to the COVID-19 pandemic. One stock in particular that has fallen back to earth is Facedrive (TSEV:FD).