ChargePoint Holdings (NYSE:CHPT) reports its fiscal Q4 2022 results on March 2 after the markets close. Down 55% over the past year, CHPT stock can’t afford any bad news from its fourth-quarter report.  

Here are three things to look for if you own shares in one of the world’s leading providers of charging stations and charging solutions.

CHPT Stock Is Close to 52-Week Low

The markets delivered a stunning comeback on Feb. 24. Russia invades Ukraine, and the Nasdaq gained more than 3.3% on the day. ChargePoint had a much-needed relief rally, gaining more than 10%, closing at $13.64. It opened the day at $11.57, 36 cents off a 52-week low. 

The last time I wrote about ChargePoint, I suggested that CHPT stock would close out 2021 in style.  

“The electric vehicle (EV) charging network’s stock gained 24% in October, is up more than 7% in November as I write this a little more than halfway through the month, and assuming there are no surprises when it reports Q3 2022 results on Dec. 7, after the markets close, the final month of 2021 could also be a winner for shareholders,” I wrote on Nov. 19.

Not so much. It lost 30% in the last six weeks of the year. Over the first eight weeks of 2022, it’s delivered more of the same. To say I’m disappointed with the turn of events is an understatement. 

Heading into its Q4 2022 report, I have no idea what its earnings will reveal. However, I thought its Q3 2022 results were pretty good. Significant year-over-year revenue gains, guidance that suggests its sales in 2022 will be 62% higher than 2021, and gross margins are pushing 25% for the past year.

However, investors focused on the $186.2 million operating loss in the first nine months of the year, more than double a year earlier. That was due to a 74% selling, general and administrative (SG&A) margin. The company continues to scale the business. Until it can get gross margins closer to SG&A margins, ChargePoint will continue to lose money.

So the first thing I would look for is an SG&A margin of less than 70% in fiscal 2022. If that doesn’t happen, it’s a warning sign that expenses might be out of control.

ChargePoint’s Enterprise Value-Sales Ratio

In the 12 months ended Oct. 31, ChargePoint had a trailing 12-month (TTM) revenue of $204 million. The company’s guidance for fiscal 2022 (ending Jan. 31, 2022) was $237.5 million at the midpoint of its projection. Based on a current enterprise value (EV) of $3.76 billion, its EV-sales ratio is 15.8.

By comparison, Blink Charging (NASDAQ:BLNK) has an EV/S of 48.7 [$750 million EV divided by TTM sales of $15.4 million], and EVgo’s (NASDAQ:EVGO) EV/S ratio is 34.3 [EV of $686.8 million divided by $20 million in sales].

ChargePoint is generating more than 10x sales of two of its publicly traded competitors, yet it has an EV/S multiple that’s half Blink and EVgo. 

The analyst estimate for ChargePoint’s 2023 revenues is $378 million. If its EV remains at $3.76 billion, its EV/S ratio falls to 9.9x, making it even cheaper than it already is. 

I would pay close attention to the company’s 2023 guidance. Will it be higher than the consensus growth estimate of 55%? Or will it be lower? That could be the difference-maker.

The Final Thing to Consider

JPMorgan analyst Bill Peterson upgraded CHPT stock to overweight from neutral at the end of January. However, he lowered his 12-month target price by $6 to $20 to account for a higher discount rate and more reasonable P/S multiple. 

However, Peterson believes investors are underestimating the company’s ability to turn a profit in the future. 

“We think investors are underestimating ChargePoint’s software and service capabilities, including the ChargePoint as a Service (CPaaS) subscription,” Barron’s reported Peterson’s comments on Jan. 28. 

In Q3 2022, ChargePoint’s subscription revenue was $13.4 million, 24% higher than a year earlier. Subscription revenues accounted for 20.6% of its overall revenue. The gross margin on this revenue is 43%. That compares to 19% for its network charging systems.    

If it can increase subscription revenue to the point it accounts for 40% of overall sales; I don’t see how it’s not making money in 2023 or 2024 at the latest. 

So, finally, I would focus on the subscription business. Read the press release, transcript, analyst comments and anything else that provides further clarity on this front. 

I don’t know about you, but I’ll be looking at the company’s ability to control expenses, its growth expectations in 2023 and beyond, and its efforts to grow its CPaaS revenue.

If these are all positive, CHPT stock will be a hit.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.