Over the past six months, EVgo’s shares (currently trading at $3.50) have posted a disappointing 10.7% loss, well below the S&P 500’s 7.6% gain. This might have investors contemplating their next move.
Is there a buying opportunity in EVgo, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is EVgo Not Exciting?
Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons why there are better opportunities than EVGO and a stock we'd rather own.
1. EPS Trending Down
Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
EVgo’s earnings losses deepened over the last three years as its EPS dropped 14.1% annually. We’ll keep a close eye on the company as diminishing earnings could imply changing secular trends and preferences.
2. Cash Burn Ignites Concerns
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
EVgo’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 121%, meaning it lit $121.10 of cash on fire for every $100 in revenue.
3. Short Cash Runway Exposes Shareholders to Potential Dilution
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
EVgo burned through $92.13 million of cash over the last year. With $164.8 million of cash on its balance sheet, the company has around 21 months of runway left (assuming its $84.54 million of debt isn’t due right away).
Unless the EVgo’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.
We remain cautious of EVgo until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.
Final Judgment
EVgo’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 29.4× forward EV-to-EBITDA (or $3.50 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
Stocks We Would Buy Instead of EVgo
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
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