Rivian (NASDAQ: RIVN) inventory went public in 2021 to nice fanfare. On the time, shares traded at a price-to-sales ratio of 60. That sort of valuation is often reserved just for hypergrowth firms.
In case you had put $500 into Rivian inventory the day it went public, how a lot would you might have proper now? The reply may shock you.
A $500 funding in Rivian would now be value this a lot
Investing in development shares might be difficult. Rivian is an ideal case examine. When the corporate went public practically three years in the past, it was producing annual gross sales of round $500 million. Over the past 12 months, nonetheless, complete gross sales have been round $5 billion.
In three quick years, the corporate has managed to spice up gross sales by practically 1,000%. However what has the inventory carried out? Over that very same time interval, Rivian shares have misplaced practically 90% of their worth. A $500 funding in 2021 could be value simply $51 in the present day. Ouch!
What’s the principle takeaway right here? It is that an organization might be rising quickly and nonetheless not make for an excellent funding. That is as a result of the corporate’s long-term funding worth is a direct perform of its cumulative (eventual) returns, and that ought to decide the value you pay. Traders in 2021 merely paid an excessive amount of for Rivian inventory. Its income development over time has been spectacular, however the market had initially priced in much more development. The corporate had too excessive of expectations from the market baked into its inventory value.
Is Rivian inventory a purchase in the present day? There are a number of causes to be optimistic, particularly now that the valuation has come all the way down to an affordable 2 occasions gross sales. However let Rivian’s historical past be a lesson to us all that inventory value actions do not all the time observe an organization’s development trajectory.
Do you have to make investments $1,000 in Rivian Automotive proper now?
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Ryan Vanzo has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.
If You’d Invested $500 in Rivian Inventory 3 Years In the past, This is How A lot You’d Have Right this moment was initially printed by The Motley Idiot