It’s hard to justify Workhorse’s (WKHS) current ~$3 billion valuation, considering that the Street expects the company to make less than $150 million in revenues next fiscal year. The major reason why the stock trades so high is due to the fact that the company might win some portion of USPS’s $6.3 billion contract to deliver its EV trucks to the country’s biggest postal service. Other than that, we don’t see any other reason to justify Workhorse’s recent share price appreciation. In addition, the lack of capacity to manufacture trucks at scale on its own is likely going to hurt the company’s margins even if it wins the contract. Considering this, we believe that Workhorse is overvalued.

Lots of Red Flags

By being a pioneer of the EV business, Workhorse worked on various electrification projects with General Motors (GM) and Mercedes for more than a decade and only later decided to sell its own EV vehicles under its brand name. Currently, the company has slightly more than 100 employees and it’s on track to deliver up to 400 C-Series EV trucks by the end of 2020.

Earlier this year, Workhorse benefited from the injection of liquidity to the markets by the Fed, as stocks managed to quickly recover from their March lows and reached new all-time highs shortly thereafter. By being an EV company, Workhorse’s stock followed the upside trend of other stocks like Tesla (TSLA), Nikola (NKLA), and NIO (NIO) and quickly appreciated and reached its own all-time high. In addition, the company was able to keep its momentum by reaching the final stage of the bidding process for USPS’s $6.3 billion contract to manufacture vans for the postal service.

While Workhorse’s growth prospects look good, its financials are not as impressive as some might think. In Q2, Workhorse’s