Substantial growth beckons the industrial sector, fortified by government support and advanced technological infusion. In this dynamic backdrop, let's determine which of the two industrial stocks, ChargePoint Holdings, Inc. (CHPT) and Vontier Corporation (VNT), hold greater long-term investment potential.
Before delving into the fundamentals of the highlighted stocks, let's assess the current landscape and developments within the industrial sector.
In August, industrial production exhibited a robust 0.4% increase, with manufacturing output showing a marginal 0.1% rise. August's total industrial production, standing at 103.5% of its 2017 baseline, outpaced the previous year by 0.2%. Additionally, capacity utilization in August reached 79.7%, aligning precisely with its historical norm.
Technological progress is also exerting an additional impact on the industrial sector. Manufacturers are increasingly embracing state-of-the-art technologies, including the Internet of Things (IoT), Artificial Intelligence (AI), and robotics, to enhance the efficiency and productivity of their industrial machinery.
Furthermore, government policies, illustrated by the substantial $6 billion commitment from the U.S. Department of Energy toward industrial decarbonization, are poised to significantly boost the demand for industrial machinery.
The investment could drive technological innovation, reduce operational costs, enhance market competitiveness, stimulate job creation, advance sustainable supply chains, and establish enduring global leadership in clean energy. Additionally, it holds the potential to secure America's long-term global manufacturing supremacy for generations.
Looking ahead, the global industrial machinery market is estimated to reach $708.30 billion by 2027, growing at a CAGR of 6.7%. In light of these prospects, both CHPT and VNT are anticipated to capitalize on the favorable trends within the industry.
In terms of price performance, CHPT has experienced a 27% decline in the past month, while VNT has seen a 2.9% gain during the same period. Furthermore, over the past six months, CHPT has witnessed a significant 48.4% decrease, in contrast to VNT’s 16.9% increase over the same duration.
Additionally, CHPT has experienced a substantial 68.6% decline over the past year, closing the last trading session at $5.09. In contrast, VNT has surged by 62.7% during the same period, reaching a closing price of $30.34 in the last trading session.
But which Industrial – Equipment stock could be a better pick? Let’s find out.
Recent Developments
CHPT recently released its second-quarter earnings results that fell short of expectations. The company attributed the shortfall primarily to an inventory impairment charge incurred on its first-generation Direct Current (DC) charging products. Although sales increased by 39% to reach $150.50 million, they still fell below the predictions made by analysts.
Furthermore, the company's guidance for the current quarter indicates expected revenue ranging from $150 million to $165 million, and for the full year, revenue is projected to be in the range of $605 million to $630 million, both of which were lower than what was anticipated.
On September 14, VNT's subsidiary, Invenco by GVR, a global frontrunner in convenience retail solutions, unveiled its collaboration with Chevron Products Co., a division of Chevron U.S.A. Inc. The alliance entails the deployment of Chevron's cutting-edge cloud-based microservices platform, iNFX, at Chevron and Texaco gas stations across the United States.
The iNFX Electronic Payment Server stands as a cloud-managed, purpose-built IoT-based microservices platform. It could position VNT to realize substantial financial gains through increased efficiency, expanded services, and improved market responsiveness.
Recent Financial Results
For the fiscal 2024 second quarter that ended July 31, 2023, CHPT’s total revenue increased 39% year-over-year to $150.49 million. However, its adjusted EBITDA loss widened 44.3% from the year-ago value to $81.16 million.
Additionally, the company’s non-GAAP net loss worsened by 40.7% from the prior year’s quarter to $87.01 million, while net loss per share stood at $0.35, worsening 25% year-over-year.
For the second quarter that ended June 30, 2023, VNT’s earnings before income taxes increased 216.3% year-over-year to $130.30 million. Its adjusted free cash flow grew 486.3% from the year-ago value to $76.80 million.
In addition, the company’s net income and net earnings per share came in at $97.30 million and $0.62, up 192.2% and 195.2% year-over-year, respectively.
Past and Expected Financial Performance
Over the past three years, CHPT’s revenue increased at a CAGR of 55%. In addition, the company’s total assets grew at a 53.3% CAGR during the same period.
Analysts expect CHPT’s revenue to come in at $876.56 million for the fiscal year ending January 2025. In addition, the company’s loss per share is expected to stand at $0.20 for the next fiscal year. Also, the company missed its consensus revenue estimates in three of four trailing quarters, which is disappointing.
Over the past three years, VNT’s revenue and EBITDA increased at a CAGR of 7.2% and 5%, respectively. In addition, its EBIT and total assets surged at respective CAGRs of 3.3% and 17.9%.
The consensus revenue estimate of $3.19 billion for the fiscal year ending December 2024 reflects a 3% improvement year-over-year. Likewise, the company’s EPS for the same period indicates an 11% rise from the previous year to $3.16. Also, it surpassed the consensus EPS estimates in all four trailing four quarters, which is impressive.
Valuation
In terms of trailing-12-month Price/Sales, CHPT is currently trading at 3.22x, 113.2% higher than VNT, which is trading at 1.51x. Moreover, CHPT’s trailing-12-month EV/Sales multiple of 3.49 is 58.6% higher than VNT’s 2.20x. Additionally, CHPT’s trailing-12-month Price to Book multiple of 6.77 compares with VNT’s 6.87x.
Profitability
VNT’s trailing-12-month revenue is 5.7 times that of what CHPT generates. Moreover, VNT is more profitable, with a trailing-12-month gross profit margin of 45.28%, compared to CHPT’s 15.63%. Moreover, VNT has a trailing-12-month cash from operations of $431.20 million compared to CHPT’s negative $323.98 million.
Additionally, VNT’s trailing-12-month EBITDA margin and net income margin are 21.82% and 9.31%, respectively, compared to CHPT’s EBITDA margin of negative 60.54% and net income margin of negative 65.83%.
POWR Ratings
CHPT has an overall rating of F, which equates to a Strong Sell in our proprietary POWR Ratings system. Conversely, VNT has an overall rating of A, translating to a Strong Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. CHPT has an F grade for Value, justified by its higher-than-industry valuation. In terms of forward EV/Sales and Price/Sales, CHPT is trading at 3.12x and 2.98x, 87.1% and 122.4% higher than the industry averages of 1.67x and 1.34, respectively.
On the other hand, VNT has a B grade for Value, in sync with its lower-than-industry valuation. In terms of forward EV/Sales, it is currently trading at 2.27x, 15% lower than the industry average of 2.67x. Moreover, the stock’s forward Price/Sales of 1.55x compares with the 2.62x industry average.
In addition, CHPT has an F grade for Quality, justified by its low profitability. The stock’s trailing-12-month net income margin and levered FCF margin of negative 65.83% and negative 47.27% compare with the industry average of 6.21% and 5.47%, respectively.
Whereas VNT has a B grade for Quality, consistent with its high profitability. Its trailing-12-month net income margin of 9.31% is 357.6% higher than the industry average of 2.03%. Moreover, the stock’s trailing-12-month levered FCF margin of 13.91% is 93.1% higher than the 7.20% industry average.
Of the 93 stocks in the Industrial - Equipment industry, CHPT is ranked #92, while VNT is ranked #9.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Momentum, Stability, and Sentiment. Click here to view CHPT’s ratings. Get all VNT ratings here.
The Winner
Leading industrial stocks CHPT and VNT are well-positioned to capitalize on the industrial sector’s robust prospects due to government initiatives and technological advancements. However, considering CHPT’s comparatively poor financial performance, high valuation, and low profitability, VNT seems to be a better buy now.
Our research shows that the odds of success increase when one invests in stocks with an overall rating of Strong Buy. View all the top-rated stocks in the Industrial - Equipment industry here.
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VNT shares were trading at $30.43 per share on Friday afternoon, up $0.09 (+0.30%). Year-to-date, VNT has gained 57.83%, versus a 14.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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