Finance
If you invested $500 in Rivian stock three years ago, here’s how much you’d have today
Rivaans (NASDAQ: RIVN) shares went public in 2021 with much fanfare. At the time, the shares were trading at a price of price-sales ratio of 60. This type of valuation is usually reserved for companies with strong growth.
If you had put $500 into Rivian stock the day it went public, how much would you have now? The answer may surprise you.
A $500 investment in Rivian would be worth that much now
Investing in growth stocks can be difficult. Rivian is a perfect case study. When the company went public almost three years ago, it generated annual revenue of about $500 million. However, over the past twelve months, total sales were approximately $5 billion.
In three short years, the company has managed to increase sales by almost 1,000%. But what has the stock done? Over that same period, so have Rivian shares lost almost 90% of their value. A $500 investment in 2021 would be worth just $51 today. Ouch!
What’s the key takeaway here? It’s that a company can grow quickly and still not make a good investment. That’s because the company’s long-term investment value is a direct function of its cumulative (eventual) returns, and that should determine the price you pay. Investors simply paid too much for Rivian stock in 2021. Sales growth over the years has been impressive, but the market had originally priced in even more growth. The company had overly high expectations of the market that were baked into the stock price.
Are Rivian Stocks a Buy Today? There are different reasons to be optimistic, especially now that the valuation has fallen to a reasonable 2 times turnover. But let Rivian’s history be a lesson to us all that stock price movements don’t always follow a company’s growth trajectory.
Should You Invest $1,000 in Rivian Automotive Now?
Consider the following before purchasing shares in Rivian Automotive:
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Ryan Vanzo 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 one 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
