The global automobile market is growing steadily due to increasing investments in public transport infrastructure and rising demand for affordable private vehicles, especially in emerging economies. So, investors seeking value in the auto sector for April could consider investing in top fundamentally strong auto stocks Bayerische Motoren Werke Aktiengesellschaft (BMWYY), Volkswagen AG (VWAGY), and REV Group, Inc. (REVG), which seem to have discounted value multiples.
The automotive sector is also expected to expand this year due to heightened demand for hybrid and electric vehicles and advancements in technological and manufacturing processes. Last year, U.S. electric vehicle sales surged to 1.19 million units, a 46% increase from the prior year, capturing a 7.6% share of total car and light truck sales.
In addition, U.S. vehicle sales in March 2024 reached 15.50 million units annually, with passenger vehicle sales up 1.3% year-on-year and light-truck sales rising by 5.4%. Light trucks represented 80% of total sales, marginally higher than in March 2023, reflecting ongoing market preferences.
Moreover, the Biden administration allocated $623 million for EV and hydrogen infrastructure development, with 70% earmarked for disadvantaged communities to improve EV charging access. Additionally, $70 million is designated for Texas to establish a hydrogen corridor to Southern California, aiming to enhance infrastructure for hydrogen-powered vehicles.
Considering these encouraging market trends, let’s examine the fundamentals of the three Auto & Vehicle Manufacturers stock picks.
Stock #3: Bayerische Motoren Werke Aktiengesellschaft (BMWYY)
Based in Munich, Germany, BMWYY is an international automotive company specializing in the production and sale of automobiles and motorcycles under renowned brands such as BMW, MINI, and Rolls-Royce. The company operates worldwide through a network of independent dealerships and importers.
BMWYY’s forward EV/Sales multiple of 0.98 is 17.8% lower than the industry average of 1.19. Its forward EV/EBIT of 9.73x is 27.4% lower than the industry average of 13.39x.
On March 18, 2024, BMWYY partnered with German winter sports athletes, leveraging automotive technologies like wind tunnel analysis and 3D-printed spike plates to enhance performance. These innovations aim to optimize athletes' stance, aim, and equipment dynamics for competitive success, particularly targeting the Winter Olympic Games in 2026.
On February 29, BMWYY developed E Ink technology, allowing dynamic color changes on vehicle bodies, advancing from black and white to multi-colored exteriors, showcased in the BMW i5 Flow NOSTOKANA concept vehicle. This innovation highlights potential applications in energy efficiency and artistic expression, earning global recognition and innovation accolades.
In the fiscal year ended December 31, 2023, BMWYY's revenues increased 9.2% year-over-year to €107.84 billion ($115.77 billion). The company achieved gross profit of €17 billion ($18.25 billion) and net profit of €4.37 billion ($4.69 billion). Also, its cash and cash equivalents as of December 31, 2023, amounted to €6.15 billion ($6.60 billion).
Analysts expect BMWYY’s revenue and EPS to grow marginally and 2.4% year-over-year to $169.49 billion and $6.48 for the fiscal year 2024, respectively.
The stock has surged 15.3% over the past six months and 10.8% over the past three months to close the last trading session at $40.17. It also gained marginally intraday.
BMWYY’s POWR Ratings reflect this strong outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BMWYY has an A grade for Stability and a B for Value. Within the Auto & Vehicle Manufacturers industry, it is ranked #10 out of 52 stocks.
Click here for BMWYY’s additional Growth, Momentum, Sentiment, and Quality ratings.
Stock #2: Volkswagen AG (VWAGY)
Based in Wolfsburg, Germany, VWAGY is a global automotive company that operates in four segments: Passenger Cars and Light Commercial Vehicles; Commercial Vehicles; Power Engineering; and Financial Services. The company manufactures and sells vehicles globally under various brand names, including Volkswagen, Audi, and Porsche.
VWAGY’s forward EV/Sales of 0.81x is 32.3% lower than the industry average of 1.19x. Its forward EV/EBITDA multiple of 6.58 is 29.7% lower than the industry average of 9.36.
On April 11, VWAGY announced a €2.50 billion ($2.68 billion) investment in its production and innovation hub in Hefei, China. The investment aims to boost electric vehicle production and includes preparations for the production of two new VWAGY brand models with Chinese partner XPeng Inc. (XPEV) starting in 2026.
On March 21, VWAGY deepened its partnership with Mobileye Global Inc. (MBLY) to introduce new automated driving features, utilizing MBLY's SuperVision and Chauffeur platforms across Audi, Bentley, Lamborghini, and Porsche brands. The collaboration aims to integrate partially and highly automated driving features, including automated overtaking and halting at red lights, with plans for full automation in the long term.
During the fiscal year that ended December 31, 2023, VWAGY’s sales revenue increased 15.5% from the prior year to €322.28 billion ($345.89 billion). The company reported an operating result and gross profit of €22.58 billion ($24.23 billion) and €61.02 billion ($65.49 billion), up 2.1% and 16.9% year-over-year, respectively. Also, its earnings attributable to VWAGY grew 7.6% year-over-year to €16.01 billion ($17.19 billion).
For fiscal year 2024, VWAGY anticipates sales revenue to surpass the previous year’s figure by up to 5%, with an operating return on sales expected to range between 7% and 7.5%.
Street expects VWAGY’s revenue to be $352.76 billion for the fiscal year 2024. Its EPS for the same year is expected to grow 67.4% year-over-year to $5.84. The company surpassed the revenue estimates in each of the trailing four quarters.
VWAGY’s stock soared 18.7% over the past six months and 16.5% over the past three months to close the last trading session at $15.72.
VWAGY’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
VWAGY has an A grade for Value and Stability and a B for Growth. It is ranked #8 within the same industry.
In addition to the POWR Ratings stated above, VWAGY’s Momentum, Sentiment, and Quality ratings can be accessed here.
Stock #1: REV Group, Inc. (REVG)
REVG designs, manufactures, and distributes specialty vehicles and related aftermarket parts worldwide. Its segments include Fire & Emergency; Commercial; and Recreation, offering a diverse range of products under various brand names.
REVG’s forward EV/Sales multiple of 0.46 is 74.1% lower than the industry average of 1.77. Its forward EV/EBITDA of 7.35x is 36.5% lower than the industry average of 11.57x.
On March 29, 2024, Spartan Emergency Response, a REVG subsidiary, appointed Greenwood Emergency Vehicles as its dealer for Maine and New Hampshire, expanding its representation in the Northeast. Greenwood's established reputation and extensive experience in serving fire and EMS providers align with Spartan's commitment to providing quality fire apparatus and excellent customer support.
On March 6, REVG declared a quarterly cash dividend in the amount of $0.05 per share of common stock, payable on April 12, 2024. It pays an annual dividend of $0.20 per share, which translates to a dividend yield of 0.97% on the current share price. Its four-year average yield is 2.28%. The company has raised its dividend payouts at a CAGR of 58.7% over the past three years.
REVG reported net sales of $586 million in the first quarter that ended January 31, 2024. Its adjusted EBITDA and net income rose 43.2% and 113% from the year-ago quarter to $30.50 million and $14.70 million, respectively.
As of January 31, 2024, its total assets amounted to $1.42 billion, compared to total assets of $1.41 billion as of October 31, 2023.
For the fiscal year 2024, REVG expects net sales between $2.45 billion and $2.55 billion, with net income ranging from $224 million to $245 million. Adjusted EBITDA is projected between $145 million and $165 million, while adjusted net income and adjusted free cash flow are anticipated to be $72 million to $90 million and $57 million to $72 million, respectively.
For the fiscal year ending October 2024, REVG’s EPS is likely to increase 7.8% year-over-year to $1.47. Its revenue for the same year is expected to be $2.49 billion. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of REVG have gained 135.7% over the past year and 109.4% over the past nine months to close the last trading session at $23.03. Also, it gained marginally intraday.
REVG’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
REVG has a B grade for Value, Sentiment, and Quality. Within the same industry, it is ranked #7.
To see additional POWR Ratings for Growth, Momentum, and Stability for REVG, click 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.
VWAGY shares were trading at $15.39 per share on Friday afternoon, down $0.33 (-2.12%). Year-to-date, VWAGY has gained 18.57%, versus a 7.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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