Rivian (Nasdaq: RIVN) The company’s shares went public in 2021 with much fanfare. At the time, the stock was trading at a price-to-earnings ratio of 60 times, a valuation that is typically only applied to fast-growing companies.
If you invested $500 in Rivian on the day its shares went public, how much would you have now? The answer might surprise you.
This is what a $500 investment in Rivian is now worth
Investing in growth stocks can be tricky. Rivian is a perfect case study: When the company went public nearly three years ago, it had annual sales of about $500 million. But total sales over the past 12 months were about $5 billion.
In just three years, the company was able to grow its sales by nearly 1,000%. But what about the stock price? During that same period, Rivian’s stock price rose 1.2%. lost That’s almost 90% of its value. $500 invested in 2021 would be worth just $51 today. Ouch!
What’s the key takeaway here? Sometimes a company may be growing fast but not be a good investment. A company’s long-term investment value is directly dependent on its cumulative (eventual) earnings, and so should the price you pay. Investors simply paid too much for Rivian stock in 2021. The company’s earnings growth over the years has been impressive, but the market initially priced in even more growth than that. Market expectations were too high for the company’s stock price.
Should you buy Rivian stock now? There are reasons to be optimistic, especially now that valuation has fallen to a reasonable level of 2x sales. But Rivian’s history offers us all a lesson: stock price movements don’t necessarily track a company’s growth trajectory.
Should you invest $1,000 in Rivian Automotive right now?
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Ryan Vanzo has no investment in any of the stocks mentioned. The Motley Fool has no investment in any of the stocks mentioned. The Motley Fool has a disclosure policy.
If You Invested $500 In Rivian Stock Three Years Ago, Here’s How Much You’d Have Today was originally published by The Motley Fool.
