Critical Factors in Assessing XYZ Corp's Growth Potential

XYZ Corp is a mid-sized company in the automotive sector, specializing in electric vehicles (EVs). The company has recently launched a new line of compact EVs targeting urban markets, which has garnered significant attention amidst rising fuel prices. Industry analysts project that the EV market will grow significantly over the next decade, driven by increasing consumer demand for environmentally friendly transportation and supportive government regulations.

A recent analysis indicates that while XYZ Corp has experienced a 15% increase in revenue over the past year, its operating margins have begun to decline due to rising raw material costs and increased competition from both traditional automakers and new entrants in the EV space. Furthermore, the company has substantial investment in R&D, with planned expenditures expected to rise by 20% next year to enhance battery technology and vehicle design.

Given this context, what is the most critical factor for an investor to consider about XYZ Corp's financial stability and growth potential in the EV industry?