XPeng Inc. (NYSE:XPEV) is a Chinese electric vehicle (EV) maker that investors either love or hate, depending on which side of the financial analysis or other factors such as emotions in stock investing they choose to support. In turn, there has been plenty of volatility in XPEV stock in 2021 — and that’s clear on the stock’s chart.

Collectively, I am a car enthusiast and I do not know if Xpeng’s EVs will dominate the Chinese market. But I know that there are good, bad and ugly things about XPEV stock.

What are they? Let’s take a deeper dive to find out.

The Good Things About XPEV Stock

Overall, Xpeng has three models in its range.

G3 is a long-range smart SUV, P7 an electric sedan and P5 — which will go into production later in 2021 — is the first production car with a built-in lidar sensor.

There is a big issue with lidar technology, though, and that is its cost. Its cost is high, but it has declined partly due to its commercialization in the car industry.

Moreover, what about the technology and design of Xpeng’s cars?

“Each new Xpeng model aims for a new high in technology, and the P5 is our most advanced and technically ambitious model yet,” He Xiaopeng, Xpeng’s chairman and CEO, said.

Nonetheless, recent good news for Xpeng and XPEV stock is the release of strong delivery numbers and the rapid revenue growth. In fact, the vehicle delivery results for June and the second quarter of 2021 were very strong.

• 6,565 vehicles delivered in June 2021, a record month with a 617% increase year-over-year (YOY).
• 17,398 vehicles delivered in 2Q 2021, a record quarter with a 439% increase YOY.
• 4,730 P7s delivered in June 2021, the highest monthly deliveries since the P7’s launch.
• 30,738 total vehicles delivered year-to-date, a 459% increase YOY.

For a carmaker, strong sales are essential. And more good news is that the global chip shortage seems to have hardly any effect on Xpeng in 2021. Could sales be higher so far without this chip shortage? We do not know, but an increase in car deliveries amid a very important chip shortage globally is certainly an impressive and positive factor for Xpeng.

Additionally, the company is also investing in its business operations expansion to be able to meet increased demand for its cars.

That said, increased deliveries will translate to higher revenue. Finally, a report about the growth of China’s electric vehicle sales seems to be optimistic as a technology market analyst firm Canalys “forecasts 1.9 million EVs will be sold in China in 2021, growth of 51% and a 9% share of all cars sold in China.”

Still, XPEV stock has a three-month return of 45% and is a highly volatile stock — still down 11.6% in 2021. It’s also having a wild swing from $72 in November 2020 to a low of $23 in May 2021 and a current price of $37.87.

Financials: The Bad Things about XPeng

In this article and every article on InvestorPlace, I analyze not just the companies, but their stocks and support my opinion with arguments. So in this respect, as I have written in the past, a great company does not mean it has a great stock. Frankly, I do not know if Xpeng is a great company as I have not tested its cars and do not know yet much about the build quality, reliability, and safety.

However, XPEV stock has severe fundamental flaws. The company is losing money, is far from being profitable and is facing a cash burn problem with negative free cash flows. Q1 2021 unaudited financial results showed the following key highlights:

• Deliveries of vehicles reached 13,340 in the first quarter of 2021, representing an increase of 487.4% from 2,271 in the corresponding period of 2020 and an increase of 2.9% from 12,964 in the fourth quarter of 2020.

• The gross margin was 11.2% for the first quarter of 2021, compared with a negative 4.8% for the same period of 2020

• Net loss attributable to ordinary shareholders of XPeng Inc. was RMB786.6 million (US$120.1 million) for the first quarter of 2021, compared with RMB935.1 million for the same period of 2020 and RMB787.4 million in the fourth quarter of 2020.

Therefore, I strongly believe that the revenue growth of Xpeng is unsustainable. It will decline in the coming years, which should not support its attempt to turn profitable and make a profit. With a focus to expand sales, the company now is not profitable even from its core operations and MorningStar reports that Xpeng’s operating margin in 2020 was -73.5%. So, with net losses and negative free cash flows, the focus is on the valuation of the stock.

The Very Ugly Thing About XPEV Stock

Comprehensively, I want to mainly refer to just two factors that signal XPEV stock is too overvalued now. First, MorningStar shows that in 2020, the book value per share for XPEV stock was $3.82. The TTM (trailing twelve-month) book value per share is $6.18.

It may seem an improvement over the figure for the fiscal year 2020. But even at $6.18, its current stock price is 6.1 times this book value per share. It is just too high.

In late June 2021, XPeng announced the pricing of a global offering and a dual listing on the Hong Kong Stock Exchange. The Chinese EV maker sold 85 million ordinary shares globally, and it now has another extra risk to consider, the regulatory risks of both U.S. and Hong Kong regulators.

However, the good news is the raising of cash about $2 billion may help the business activities. But I believe that future stock offerings are on the table soon as Xpeng may want to take advantage of the surging stock price before any other potential stock decline occurs. And that will mean additional stock dilution.

Moreover, the bad and ugly things about XPEV stock are now more powerful than the good ones. Until profitability occurs with positive free cash flows, and valuation is aligned with its stock price, I would stay away from the stock. Growth does not coincide with value now.

On the date of publication, Stavros Georgiadis, CFA 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.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.