The auto industry in the United States has made a remarkable comeback, fueled by improved economic conditions and pent-up demand from consumers who resisted purchasing vehicles during the pandemic. Therefore, fundamentally sound auto stocks AB Volvo (publ) (VLVLY), REV Group, Inc. (REVG) and Stellantis N.V. (STLA) 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 1,211,141 units, up 2% year-over-year. This increase in sales can be attributable to rising demand for electric vehicles and improved economic conditions.
In the third quarter of this year, total sales of battery-powered vehicles in the US surpassed 300,000 for the first time. Sales of electric vehicles accounted for 7.9% of overall industry sales in the third quarter, a record, up from 6.1% a year ago and 7.2% in the second quarter.
Moreover, according to MRFR/Market Research Future (MRFR), the global automotive market will reach $6.07 trillion by 2030, expanding at a CAGR of 6.9%. This growth is attributed to factors such as increasing disposable income, urbanization, and technological advancements in the automotive industry. Also, the rising demand for electric vehicles and government initiatives promoting sustainable transportation are expected to further drive the market's growth.
In addition, the global automotive motors market is expected to increase at a CAGR of 6.8% to $58.84 billion by 2030.
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: AB Volvo (publ) (VLVLY)
VLVLY, headquartered in Gothenburg, Sweden, manufactures and sells trucks, buses, and related heavy industrial equipment in Europe, North America, South America, Asia, and Africa. The company also offers financing, insurance, rental, spare parts, preventive maintenance, service agreements, and assistance services.
VLVLY’s forward non-GAAP P/E of 7.80x is 53.8% lower than the industry average of 16.89x. Its forward EV/EBIT of 8.55x is 42.3% lower than the industry average of 14.82x.
VLVLY’s trailing-12-month ROTC of 9.92% is 44.7% higher than the 6.86% industry average. Its trailing-12-month ROCE of 26.20% is 105.4% higher than the 12.76% industry average.
During the third quarter of fiscal 2023, VLVLY’s net sales increased 15.2% year-over-year to SEK132.41 billion ($12.11 billion). Its gross income rose 33.1% year-over-year to SEK36.38 billion ($3.33 billion). Its adjusted operating income grew 61% from the year-ago value to SEK19.11 billion ($1.75 billion).
Furthermore, the company’s income for the period grew 62.2% year-over-year to SEK14.09 billion ($1.29 billion), and its EPS was SEK6.93, an increase of 63.4% over the previous year’s quarter.
Analysts expect VLVLY’s revenue to increase 5.8% year-over-year to $48.80 billion for the year ending December 2023. Its EPS is expected to grow 58.1% year-over-year to $2.73 for the same year. Shares of VLVLY has gained 22.6% over the past year to close the last trading session at $20.33.
VLVLY’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.
VLVLY also has an A grade for Stability and a B for Growth and Sentiment. It is ranked #7 out of 52 stocks in the B-rated Auto & Vehicle Manufacturers industry. Click here for the additional POWR Ratings for Value, Momentum and Quality for VLVLY.
Stock #2: REV Group, Inc. (REVG)
REVG designs, manufactures, and distributes specialty vehicles and related aftermarket parts and services. The company’s customized vehicle solutions cater to diverse applications, such as essential needs for public services, commercial infrastructure, and consumer leisure.
REVG’s forward EV/Sales of 0.42x is 73.9% lower than the industry average of 1.62x. Its forward Price/Sales of 0.34x is 73.5% lower than the industry average of 1.30x.
REVG’s trailing-12-month asset turnover ratio of 1.89x is 138.4% higher than the industry average of 0.79x.
For the fiscal third quarter ended July 31, 2023, REVG’s net sales stood at $680 million, up 14.3% year-over-year. Its gross profit and operating income stood at $80.20 million and $25.70 million, up 18.3% and 49.4% from the year-ago quarter, respectively.
Its adjusted net income and adjusted net income per common share stood at $20.90 million and $0.35, up 46.2% and 45.8% from the same period last year, respectively.
The consensus revenue estimate of $2.63 billion for the fiscal year ending October 2024 represents a marginal increase year-over-year. Its EPS is expected to grow 30.1% year-over-year to $1.53 for the same year. It surpassed EPS estimates in three of four trailing quarters. REVG’s shares have gained 41.8% over the past six months to close the last trading session at $15.04.
It’s no surprise that REVG has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, Stability and Quality. It is ranked #6 in the same industry.
Beyond what is stated above, we’ve also rated REVG for Sentiment and Momentum. Get all REVG ratings here.
Stock #1: 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 1.11 is 88.1% lower than the industry average of 9.32. Its forward EV/EBIT multiple of 1.45% is 88.8% lower than the industry average of 12.90.
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 158.5% higher than the industry average of 3.85%.
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 7.3% year-over-year to $204.22 billion for the year ending December 2023. Its EPS is expected to grow 17.5% year-over-year to $6.49 for the same period. Shares of STLA have gained 44.4% over the past year to close the last trading session at $19.55.
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.
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 $19.33 per share on Tuesday morning, down $0.22 (-1.13%). Year-to-date, STLA has gained 36.13%, versus a 15.54% 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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