The automotive industry is thriving due to factors like rapid urbanization and population growth, along with rising per capita income, which influences demand for new vehicles and the adoption of electric vehicles. Given the industry’s tailwinds, investors could consider buying fundamentally sound auto stocks BYD Company Limited (BYDDY), PACCAR Inc (PCAR), and AB Volvo (publ) (VLVLY) this month.
The global automotive industry is projected to grow at a 6.8% CAGR, reaching $6.86 trillion by 2033.
The automotive industry's growth is influenced by various factors, such as the adoption of electric vehicles, the development and manufacturing of long-range batteries, the installation of fast and ultra-fast charging points, the introduction of autonomous vehicles, and the deployment of 5G connectivity.
BloombergNEF’s electric vehicle outlook projects 730 million passenger EVs on the road by 2040, comprising 44% of global passenger vehicle sales by 2030.
In addition, Artificial Intelligence (AI) is revolutionizing the automotive industry, driving advancements in autonomous vehicles and improving production capabilities, supported by growing consumer demand and government initiatives. The global automotive AI market is expected to grow at a CAGR of 22.7% by 2030.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best Auto & Vehicle Manufacturers industry stocks, beginning with the third choice.
Stock #3: BYD Company Limited (BYDDY)
Headquartered in Shenzhen, China, BYDDY deals in automobiles and batteries business in the People's Republic of China, Hong Kong, Macau, Taiwan, and internationally. The company operates in two segments: Mobile Handset Components, Assembly Service and Other Products; and Automobiles and Related Products and Other Products.
BYDDY’s trailing-12-month EBITDA margin of 12.34% is 11.2% higher than the industry average of 11.10%. Also, the stock’s trailing-12-month net income margin and ROCE of 4.99% and 24.02% are 5.5% and 110.9% higher than the industry averages of 4.73% and 11.39%, respectively.
On March 25, 2024, BYDDY became the world's first automaker to roll off its seven millionth new energy vehicle, the DENZA N7, unveiled at its Jinan factory in China, symbolizing another groundbreaking accomplishment for the brand.
On February 26, BYDDY unveiled the first pure electric supercar model U9 under its high-end sub-brand, YANGWANG, priced at RMB1.68 million ($232.08 thousand), and announced that the delivery will start this summer.
In the nine months ended September 30, BYDDY’s total operating revenue rose 57.8% year-over-year to RMB422.27 billion ($58.33 billion). Its other income grew 145% from the prior-year period to RMB2.82 billion ($389.55 million). Also, its total profit amounted to RMB26.07 billion ($3.60 billion), up 115.1% from the prior-year period.
Analysts expect BYDDY’s revenue for the first quarter (ended March 2024) to increase 5% year-over-year to $41.44 billion. For the fiscal year ending December 2025, its revenue is likely to grow 27.8% year-over-year to $106.61 billion.
BYDDY’s stock has soared 5.6% over the past month to close the last trading session at $53.46.
BYDDY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates 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.
The stock has an A grade for Sentiment and a B in Quality and Value. It is ranked #16 in the 52-stock Auto & Vehicle Manufacturers industry.
Beyond what is stated above, we’ve also rated BYDDY for Growth, Momentum, and Stability. Get all BYDDY ratings here.
Stock #2: PACCAR Inc (PCAR)
PCAR designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks in the United States, Canada, Europe, Mexico, South America, Australia, and internationally. It operates through three segments: Truck; Parts; and Financial Services.
PCAR’s trailing-12-month EBIT margin of 17.20% is 72.7% higher than the industry average of negative 9.96%. Its trailing-12-month EBITDA margin of 18.44% is 35% higher than the 13.66% industry average. Also, the stock’s trailing-12-month net income margin of 13.10% is 121.8% higher than the 5.91% industry average.
During the fourth quarter, which ended December 31, 2023, PCAR’s sales and revenues grew 11.7% year-over-year to $9.08 billion. The company’s net income and net income per share rose 53.8% and 53.4% from a year-ago quarter to $1.42 billion and $2.70, respectively.
As of December 31, 2023, its current assets amounted to $40.82 billion, compared to its previous fiscal year’s current assets of $33.28 billion.
PCAR’s revenue and EPS are expected to be $31.58 billion and $8.06, respectively, for the fiscal year ending December 2024. The company surpassed its revenue and EPS estimates in each of the trailing four quarters, which is promising.
Shares of PCAR have gained 25.7% over the past three months to close the last trading session at $118.88.
PCAR’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
PCAR has a B grade for Stability. It is ranked #15 in the same industry.
In addition to the POWR Ratings highlighted above, one can access PACR’s ratings for Sentiment, Value, Quality, Growth and Momentum, here.
Stock #1: AB Volvo (publ) (VLVLY)
Headquartered in Gothenburg, Sweden, VLVLY and its subsidiaries manufacture and sell trucks, buses, construction equipment, and marine and industrial engines internationally.
VLVLY’s trailing-12-month EBIT margin of 14.50% is 46.1% higher than the industry average of 9.92%, and its trailing-12-month EBITDA margin of 15.64% is 14.2% higher than the industry average of 13.69%. In addition, the stock’s trailing-12-month net income margin of 9.01% is 52.3% higher than the 5.92% industry average.
On April 12, VLVLY announced its plans to build a new heavy-duty truck plant in Mexico to bolster its U.S. production. This move will aid the growth of Volvo and Mack Trucks in the U.S. and Canadian markets and support Mack truck sales in Mexico and Latin America. Operations are slated to start in 2026.
During the fiscal fourth quarter, which ended on December 31, 2023, VLVLY’s net sales increased 10.3% year-over-year to SEK148.12 billion ($13.80 billion). The company’s adjusted operating income stood at SEK18.38 billion ($1.72 billion), reflecting a 51% increase year-over-year.
Moreover, its income for the period and EPS rose 80.7% and 81.9% from the previous year’s quarter to SEK12.09 billion ($1.13 billion) and SEK5.93, respectively.
Street expects VLVLY’s EPS and revenue for fiscal year 2025 to increase 8.6% and 5.2% year-over-year to $2.38 and $49.99 billion, respectively.
VLVLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
VLVLY has a B grade for Stability and Quality. It is ranked #13 in the same industry.
Click here to access the additional VLVLY ratings (Growth, Value, Momentum, and Sentiment).
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.
BYDDY shares were trading at $52.61 per share on Friday afternoon, down $0.85 (-1.58%). Year-to-date, BYDDY has declined -4.81%, versus a 7.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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