Eos Energy Enterprises Inc. (EOSE) in Edison, N.J. develops, produces, and implements battery storage systems for the utility, commercial and industrial, and renewable energy industries in the United States. The company's flagship product is its Eos Znyth DC battery system, which is developed to suit the needs of the grid-scale energy storage sector. The company's shares have advanced 8.5% in price over the past month in response to EOSE entering a master supply agreement with Bridgelink Commodities, LLC for prospective storage sites in Texas.

However, the stock is down 78.7% over the past year and 52.3% over the past three months, closing yesterday's trading session at $3.69. In addition, it is currently trading 83.3% below its 52-week high of $22.08, which it hit on March 19, 2021.

The broader market sell-off has wrought a major slump in the stock's price. In addition, the sector is grappling with fundamental issues, most notably cost inflation and the prospect of future interest rate increases.

Here is what could shape EOSE's performance in the near term:

Stretched Valuation

In terms of trailing-12-months EV/Sales, the stock is currently trading at 3.78x, which is 120.9% higher than the 1.71x industry average. Also, its 3.63x forward Price/Sales multiple is 155.6% higher than the 1.42x industry average. Moreover, EOSE's 5.64x trailing-12-months Price/Book is 112.6% higher than the 2.65x industry average.

Negative bottom line

EOSE's total revenue increased substantially year-over-year to $4.59 million for the fourth quarter, ended Dec. 31, 2021. Its operating loss grew 248.3% from the prior-year quarter to $134.72 million. The company's net loss surged 75.8% from its year-ago value to $124.22 million, while its loss per share amounted to $2.36. In addition, its net cash used in operating activities increased 337.3% for the year ended Dec. 31, 2022, to $116.15 million.

Poor Profitability

EOSE's 0.03% trailing-12-months asset turnover ratio  is 96.2% lower than the 0.78% industry average. Also, its ROA and ROC are negative 73.4% and 48.7%, respectively. And its  trailing-12-month cash from operations stood  at negative $116.15 million compared to its $205.57 million industry average.

POWR Ratings Reflect Uncertainty

EOSE has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. EOSE has an F grade for Quality and a D for Value. The company's weak profitability and financials are consistent with the Quality grade. In addition, the stock's higher-than-industry valuation is in sync with the Value grade.

Among the 92 stocks in the C-rated Industrial – Equipment industry, EOSE is ranked #89.

Beyond what I have stated above, you can view EOSE ratings for Growth, Stability, Sentiment, and Momentum here.

Click here to check out our Industrial Sector Report for 2022

Bottom Line

EOSE's lofty valuation and weak profitability have been a cause of concern for investors as the clean energy sector becomes highly competitive. In addition, the company's widening losses and the analysts’ expectations that its EPS will  remain negative in its fiscal 2022 and 2023 could  cause its share price to retreat further. Therefore, we believe the stock is best avoided now.

How Does Eos Energy Enterprises Inc. (EOSE) Stack Up Against its Peers?

While EOSE has an overall F rating, one might want to consider its industry peers, Preformed Line Products Company (PLPC), Standex International Corporation (SXI), and Applied Industrial Technologies Inc. (AIT) which has an overall A (Strong Buy) rating.