Despite macroeconomic concerns, auto sales in the United States are expected to increase due to pent-up demand and technological advancements. Therefore, fundamentally sound auto stocks Suzuki Motor Corporation (SZKMY), Stellantis N.V. (STLA) and Honda Motor Co., Ltd. (HMC), which investors are bullish about, could be wise portfolio additions.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the auto industry.
In October, the number of new vehicles sold in the U.S. was 1,209,805 units, up 9.8% from September and increasing marginally year-over-year. This increase in sales can be attributable to rising demand for electric vehicles and improved economic conditions.
The global automotive market is expected to increase at a CAGR of 6.9% to $6.07 trillion by 2030. Rising demand for high-end passenger automobiles, urbanization, and increased infrastructure spending in the economy are driving the automotive market forward.
Moreover, rising demand for self-driving cars and the incorporation of AI technologies into automotive systems are boosting the automotive artificial intelligence market. Also, advances in machine learning algorithms and computer vision are propelling AI usage in the automotive industry. The global automotive artificial intelligence (AI) market is expected to be worth $7 billion by 2027, with a CAGR of 24.1%.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Auto & Vehicle Manufacturers stocks, starting with number 3.
Stock #3: Suzuki Motor Corporation (SZKMY)
Headquartered in Hamamatsu, Japan, SZKMY manufactures and markets automobiles, motorcycles, and marine products in Japan, the rest of Asia, Europe, North America, and internationally. It offers mini-vehicles, sub-compact vehicles, standard-sized vehicles, outboard motors, motorized wheelchairs, and electro-senior vehicles. The company is also involved in solar power generation and logistics business.
SZKMY’s forward EV/Sales of 0.64x is 43.9% lower than the industry average of 1.10x. Its forward EV/EBIT of 7.69x is 39.5% lower than the industry average of 12.70x.
SZKMY’s trailing-12-month CAPEX / SALES of 5.20% is 61.8% higher than the 3.22% industry average. Its trailing-12-month ROTA of 4.79% is 21.8% higher than the 3.94% industry average.
For the fiscal first quarter ended June 30, 2023, SZKMY’s net sales increased 13.7% year-over-year to ¥1.21 trillion ($8.09 billion). Its operating profit rose 33.9% over the prior-year quarter to ¥99.80 billion ($667.38 million). The company’s ordinary profit increased 20.3% year-over-year to ¥108 billion ($722.22 million).
Also, its profit attributable to owners of parent rose 15.1% year-over-year to ¥67.06 billion ($448.44 million). In addition, its EPS came in at ¥138.04, representing an increase of 15% year-over-year.
Analysts expect SZKMY’s revenue to increase 110.5% year-over-year to 34.31 billion for the year ending March 2024. Shares of SZKMY has gained 23.1% year-to-date to close the last trading session at $158.28.
SZKMY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SZKMY also has an A grade for Stability and a B for Value and Quality. It is ranked #10 out of 52 stocks in the B-rated Auto & Vehicle Manufacturers industry. Click here for the additional POWR Ratings for Growth, Sentiment and Momentum for SZKMY.
Stock #2: Stellantis N.V. (STLA)
Headquartered in Hoofddorp, the Netherlands, STLA designs, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems worldwide. It offers its products under the Abarth, Alfa Romeo, Chrysler, DS, Dodge, Jeep, Fiat, Maserati, Ram, Opel, Lancia, Vauxhall, Peugeot, Comau, and Teksid brands.
STLA’s forward EV/EBITDA multiple of 1.04 is 88.3% lower than the industry average of 8.88. Its forward EV/EBIT multiple of 1.36% is 89.3% lower than the industry average of 12.70.
STLA’s trailing-12-month ROCE of 27.85% is 145.7% higher than the industry average of 11.34%, while its trailing-12-month ROTA of 9.95% is 152.7% higher than the industry average of 3.94%.
STLA’s net revenues for the six months ended June 30, 2023, increased 11.8% year-over-year to €98.37 billion ($105.52 billion). Its net profit increased 37.2% year-over-year to €10.92 billion ($11.71 billion). Its adjusted operating income rose 11% year-over-year to €14.13 billion ($15.16 billion). The company’s EPS came in at €3.45, representing an increase of 39.7% year-over-year.
Street expects STLA’s revenue to increase 5.8% year-over-year to $201.35 billion for the year ending December 2023. Its EPS is expected to grow 16.3% year-over-year to $6.42 for the same period. Shares of STLA have gained 38% over the past year to close the last trading session at $18.94.
STLA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #2 in the same industry. It has an A grade for Value and a B grade for Stability, Sentiment and Quality. To see additional STLA’s ratings for Growth and Momentum, click here.
Stock #1: Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
HMC’s forward EV/Sales of 0.63x is 42.2% lower than the industry average of 1.10x. Its forward Price/Sales of 0.39x is 49.5% lower than the industry average of 0.78x.
HMC’s trailing-12-month levered FCF margin of 8.42% is 61.8% higher than the industry average of 5.20%. Its trailing-12-month EBITDA margin of 13.12x is 20.2% higher than the industry average of 10.91x.
For the first quarter that ended June 30, 2023, HMC’s sales revenue increased 20.8% year-over-year to ¥4.62 trillion ($31.32 billion). The company’s operating profit increased 77.5% year-over-year to ¥394.45 billion ($2.67 billion). Its profit for the period increased 134.1% year-over-year to ¥382.95 billion ($2.60 billion). In addition, its EPS came in at ¥219.06, representing an increase of 151.1% year-over-year.
The consensus revenue estimate of $129.71 billion for the fiscal year ending March 2024 represents a 386.6% increase year-over-year. Its EPS is expected to grow 41.4% year-over-year to $4.04 for the same year. HMC’s shares have gained 36.6% over the past year to close the last trading session at $31.37.
It’s no surprise that HMC has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Value and Sentiment and a B grade for Growth, Stability and Quality. It is ranked first in the same industry.
Beyond what is stated above, we’ve also rated HMC for Momentum. Get all HMC ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
STLA shares were trading at $19.50 per share on Thursday morning, up $0.56 (+2.96%). Year-to-date, STLA has gained 37.32%, versus a 13.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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