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Why Romeo Power Stock Is Racing Higher Today

By Scott Levine – Nov 16, 2021 at 12:23PM

Key Points

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This company is powering investors' excitement today.

What happened

Down 55% from the start of the year through yesterday's trading session, shares of Romeo Power (RMO) have ridden a rocky road in 2021. Today, however, the stock is making a U-turn as investors celebrate the third-quarter earnings report that the developer of electrification solutions for commercial vehicles reported after the bell yesterday.

As of 11:20 a.m. EST on Tuesday, shares of Romeo Power are up 16%, having given back some of the 25% rise that they experienced earlier this morning.

A businessperson touches a financial chart on a tablet.

Image source: Getty Images.

So what

Romeo surpassed analysts' expectations for third-quarter revenue of $4.4 million, reporting $5.8 million on the top line, a startling increase over the $675,000 in sales that it reported during the same period last year.

It's not only the year-over-year increase that's charging up investors' spirits today, but also the possibility that the top-line growth will extend over the coming quarters. In the quarterly filing, management stated that it expects "the current volume of our commercial vehicle battery pack and module production and delivery activity to continue growing as we increase delivery on the four supply contracts that started production and delivery during 2021."

In addition to the surprise at the top of the income statement, investors found a surprisingly narrower loss per share of $0.13 than the $0.28 loss that analysts anticipated. Although the company continues to report a net loss, investors are likely encouraged by the progress toward profitability. Through the first nine months of 2021, Romeo Power has generated earnings before interest, taxes, depreciation, and amortization (EBITDA) of $49.4 million, representing a stark turnaround from the negative $20.5 million in EBITDA that it had during the same period in 2020.

Now what

While Romeo Power has provided investors with impressive revenue and earnings surprises for the previous quarter, it's important for prospective investors to pump the brakes before deciding to buy this EV stock. It's still early, and it will be interesting to see if the company continues to grow revenue and achieve profitability.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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