SpaceX (SPCX) vs Rocket Lab (RKLB): Which is a Better Stock to Buy?

Space Exploration Technologies Corp. (NASDAQ: SPCX ) closed at $158.96 on October 2, and Rocket Lab Corporation (NASDAQ: RKLB ) at $73.92.

One of these companies is roughly forty times the size of the other. Neither makes a profit. The interesting part is that the market charges a similar price for each dollar of their sales, which is an odd way to value two businesses this different.

Start with how far apart these two are. SpaceX generated $23.04 billion of revenue over the past twelve months. Rocket Lab generated $769.15 million, which is about one thirtieth as much. SpaceX is also growing faster off that far larger base, at 91.90% in the most recent quarter against 62.00% at Rocket Lab.

The balance sheets are not comparable at all. SpaceX holds $100.01 billion of cash against $39.71 billion of debt, a position that lets it fund almost anything it chooses without asking the market for money.

Rocket Lab holds $2.30 billion against $133.69 million of debt, which is sound but is not the same kind of freedom. Cash generation separates them further. SpaceX produced $9.90 billion of operating cash flow while Rocket Lab consumed $222.46 million.

Neither Is Priced on Earnings, Because There Are None:

Both companies lose money, so the usual measures do not apply. SpaceX reported a net loss of $8.89 billion and Rocket Lab a loss of $165.46 million. Neither has a trailing price-to-earnings ratio because the calculation would be meaningless.

That forces the comparison onto sales, and here the market does something strange. SpaceX trades at 68.49 times revenue and Rocket Lab at 53.41 times.

The larger, faster-growing, cash-generating company carries the higher multiple of the two. A bigger company usually trades on a lower multiple of sales, because growth is harder to sustain at size. Here it does not.

The losses have different characters though. SpaceX has an operating margin of negative 1.80%, so the core business is close to breaking even, and the reported loss comes largely from items below that line.

Rocket Lab's operating margin is negative 24.57%, which means the loss is in the operations themselves.

Short sellers see the difference. Rocket Lab has 7.31% of its float sold short against 2.43% at SpaceX. Rocket Lab ranks third among the space stocks analysts favor, and the largest space company in the world does not appear on that list at all. You can find it here.