Over recent years, consumers worldwide have displayed a growing preference for Electric Vehicles (EVs), driven by many factors, including surging fuel and gas prices, mounting environmental concerns, and a desire for cleaner and more sustainable transportation alternatives. The global EV market is projected to reach around $1.72 trillion by 2032, growing at a robust CAGR of 23.1%.
With this trend in mind, in this article, I have evaluated the fundamentals of three automotive companies, Blue Bird Corporation (BLBD), Wabash National Corporation (WNC), and Volkswagen AG (VWAGY), which are B-rated in our proprietary POWR Ratings system and could be better buys than EV giant Tesla, Inc. (TSLA). Let us understand why.
TSLA, the pioneering electric vehicle, and clean energy company that has redefined the automotive industry, is now facing intensified competition from well-established automakers. These traditional giants are making substantial investments in electric vehicle technology and introducing their own EV models to challenge TSLA’s dominance in the rapidly expanding electric vehicle market.
Given the rising competition, in an attempt to maintain its competitive edge, TSLA has been consistently slashing prices to boost its sales volume. However, this ongoing "EV price war" could potentially have an adverse impact on the company's overall profitability. This strategy has led Goldman Sachs analyst Mark Delaney to reduce his EPS projections for TSLA in 2023 and 2024.
The Goldman Sachs analyst has revised down the earnings estimates for fiscal year 2023 to $3.40 per share, a decrease from the previous estimate of $3.50 per share. Additionally, for fiscal year 2024, Delaney anticipates EPS of $4.65, a reduction from his earlier projection of $4.75 per share.
Furthermore, in terms of valuation, the stock is trading much higher than the industry average. For instance, TSLA’s forward non-GAAP P/E of 76.75x is 438.9% higher than the 14.24x industry average. While its forward EV/Sales of 8.24x is 627.8% higher than the industry average of 1.12x.
On the other hand, driven by falling battery prices, EVs are expected to achieve price parity with fossil fuel cars in the near future and account for two-thirds of global car sales by 2030, underscoring a new sales growth avenue for the automotive industry.
Considering all the above factors, investors looking to capitalize on the growing demand for EVs, could consider buying BLBD, WNC, and VWAGY, trading under $30, instead of TSLA. To that end, let us dive into the fundamentals of these Auto & Vehicle Manufacturers stocks, beginning with number three.
Stock #3: Blue Bird Corporation (BLBD)
BLBD designs, engineers, manufactures, and sells school buses and related parts in the United States, Canada, and internationally. It operates through two segments: Bus and Parts. In addition to compressed natural gas and diesel-powered buses, the company also offers electric-powered school buses.
On September 19, BLBD delivered a total of 13 electric school buses to the Bowling Green Independent School District (BGISD) situated in Kentucky, which serves around 4,400 students across eight schools and initiated a pilot program aimed at expanding its school bus fleet by introducing zero-emission vehicles.
This development underscores BLBD’s commitment to supporting the adoption of electric buses in the school district.
On May 25, BLBD marked a significant achievement with the inauguration of its EV Build-up Center at its primary U.S. manufacturing plant in Fort Valley, Georgia. This facility spans approximately 40,000 square feet and has been established to meet the surging demand for electric school buses.
Moreover, this inauguration signifies a pivotal milestone for the company as it takes significant strides to bolster its production capabilities for electric school buses, with the ambitious goal of ramping up daily production from four to 20 vehicles.
In terms of forward EV/Sales, BLBD is trading at 0.64x, 61.6% lower than the industry average of 1.67x. The stock’s forward Price/Sales of 0.57x is 58.3% lower than the 1.36x industry average. Likewise, the stock’s forward Price/Cash Flow ratio of 7.49x is 42.9% lower than the 13.10x industry average.
In the fiscal third quarter, which ended on July 1, 2023, BLBD’s net sales increased 42.8% year-over-year to $294.28 million, while its gross profit grew 111.9% from the year-ago value to $45.75 million. Also, its operating profit rose significantly year-over-year to $19.42 million.
Furthermore, the company’s net income and EPS amounted to $9.36 million and $0.29 versus a net loss and loss per share of $6.44 million and $0.20 in the prior-year quarter, respectively.
Analysts expect BLBD’s revenue for the fiscal fourth quarter (ending September 2023) to increase 12.6% year-over-year to $290.11 million, while its EPS for the ongoing quarter is expected to be $0.48. Additionally, the company’s EPS is projected to improve by 15% per annum over the next five years. BLBD has an excellent surprise history, surpassing its revenue estimates in each of the trailing four quarters.
The stock has surged 99.2% over the past year and 83.4% year-to-date to close the last trading session at $19.64.
BLBD’s POWR Ratings reflect this robust outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth and Quality. In the 56-stock Auto & Vehicle Manufacturers industry, it is ranked #21. Click here to see BLBD’s ratings for Value, Momentum, Stability, and Sentiment.
Stock #2: Wabash National Corporation (WNC)
WNC designs, manufactures, and distributes connected solutions for the transportation, logistics, and distribution industries, primarily in the United States. The company operates through two segments: Transportation Solutions and Parts & Services.
On August 25, WNC hosted a ribbon-cutting event for its advanced dry van trailer manufacturing facility in Lafayette, Indiana. This newly inaugurated facility incorporates cutting-edge manufacturing technology to enhance the working environment and establish a more consistent production process.
First unveiled in July 2021, this strategic expansion in capacity can manufacture an extra 10,000 dry van trailers each year. The company anticipates that the complete effects of this increased capacity will become significantly evident by the year 2024.
On August 17, WNC declared a quarterly dividend of $0.08 per share on the company’s common stock, payable to its shareholders on October 26, 2023.
The company’s annual dividend of $0.32 translates to a 1.43% yield on the current share price. While its four-year average dividend yield is 2.07%. Its dividend payouts have grown at a CAGR of 2.3% over the past five years.
In terms of forward EV/Sales, WNC is trading at 0.52x, 69.1% lower than the industry average of 1.68x. The stock’s forward EV/EBITDA of 3.85x is 65.1% lower than the 11.00x industry average. Furthermore, the stock’s forward Price/Sales ratio of 0.40x is 70.4% lower than the 1.34x industry average.
For the fiscal second quarter, which ended on June 30, 2023, WNC’s net sales increased 6.8% year-over-year to $686.62 million, while its gross profit rose 93.5% from the year-ago value to $151.03 million.
The company’s net income attributable to common shareholders amounted to $74.33 million and $1.54 per share, up 229.6% and 234.8% from the prior-year quarter, respectively. In addition, its cash and cash equivalents came in at $98.79 million, increasing 69.6% compared to $58.25 million as of December 31, 2022.
The consensus revenue estimate of $679.03 million for the third quarter (ending September 2023) represents a 3.6% increase year-over-year. The consensus EPS estimate of $1.03 for the same quarter indicates a 40.4% improvement year-over-year. Moreover, the company surpassed the consensus EPS in each of the trailing four quarters, which is impressive.
Over the past year, WNC’s shares surged 45.9% to close the last trading session at $22.30.
WNC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Value and a B for Quality. Within the same industry, it is ranked #15. Click here to see the other ratings of WNC for Growth, Momentum, Stability, and Sentiment.
Stock #1: Volkswagen AG (VWAGY)
Based in Wolfsburg, Germany, VWAGY manufactures and sells automobiles in Germany, Europe, North America, South America, the Asia-Pacific, and internationally. The company operates through four segments: Passenger Cars and Light Commercial Vehicles; Commercial Vehicles; Power Engineering; and Financial Services.
On July 26, VWAGY solidified its presence in the Chinese automotive market through partnerships between the VW brand and XPENG, as well as between Audi and SAIC. This move is part of the Group's ongoing efforts to bolster its electric mobility strategy within China.
The goal is to quickly access emerging customer segments and markets, strategically capitalizing on the rapid growth of China's electric mobility sector.
In the same month, VWAGY and its brand, Elli, launched electricity trading on EPEX Spot, Europe’s largest power exchange. The project encompasses the integration of battery storage systems and the development of a digital platform for trading both electricity and battery capacity.
Elli's objective is to construct an intelligent energy portfolio, with both companies committed to supporting the transition to cleaner energy by harnessing the potential of electric vehicles and battery storage capabilities.
In terms of forward EV/Sales and Price/Sales, VWAGY is trading at 0.81x and 0.18x, which are 29.5% and 79% lower than the industry averages of 1.14x and 0.86x, respectively. Also, its forward EV/EBITDA multiple of 6.16x is 34.5% lower than the industry average of 9.40x.
For the second quarter that ended June 30, 2023, VWAGY’s sales revenue increased 15.2% year-over-year to €80.06 billion ($85.55 billion). Its operating result improved 24.7% from the year-ago value to €5.60 billion ($5.98 billion), while its earnings after tax amounted to €3.79 billion ($4.05 billion). Also, its vehicle sales units increased 15.5% year-over-year to 2.32 million.
Street expects VWAGY’s revenue and EPS for the fiscal period ending December 2023 to increase 10% and 80.5% year-over-year to $329.89 billion and $5.74, respectively. Moreover, the company topped its revenue estimates in three of the trailing four quarters, which is promising.
VWAGY’s shares have gained marginally intraday to close the last trading session at $13.49.
It’s no surprise that VWAGY has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Value and Stability and a B for Growth. Out of 56 stocks in the same industry, it is ranked #12.
In addition to the POWR Ratings we’ve stated above, we also have VWAGY’s ratings for Momentum, Sentiment, and Quality. Get VWAGY all ratings here.
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TSLA shares were trading at $267.44 per share on Wednesday afternoon, up $0.94 (+0.35%). Year-to-date, TSLA has gained 117.11%, versus a 17.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
3 B-Rated Auto Buys Priced Under $30 AND Better Than Tesla (TSLA) StockNews.com
