The future horizons of the automotive industry appear promising, underpinned by robust demand for new vehicles, ascending trends within supply-chain conditions, and a brisk transition towards EVs spurred by favorable government incentives. The infusion of advanced technologies further consolidates the potential growth within the sector.
Given the industry’s bright growth prospects, investors could invest in fundamentally sound auto stocks Isuzu Motors Limited (ISUZY), Suzuki Motor Corporation (SZKMY), and REV Group, Inc. (REVG).
Despite grappling with inflation, semiconductor shortages, and supply chain disruptions, the global automotive industry has successfully sustained operations, met customer needs, and charted strategic transit routes for growth.
In November, new vehicle sales in the U.S. reached 1,242,376 units, marking an 8.8% year-over-year rise. Fueled by efficient inventory management and strong consumer demand, global auto sales could reach 86.80 million units in 2023.
As 2024 approaches, S&P Global Mobility predicts 88.3 million new vehicle sales globally owing to improved demand and supply chains. As per Statista, production of motor vehicles in the U.S. is projected to reach 11.7 million units by 2025. The global automotive market is expected to increase at a CAGR of 3% to $3.58 trillion by 2031.
EV sales have been rising rapidly, setting records in the third quarter. In November 2023, monthly sales of battery electric vehicles (BEVs) and plug-in hybrids (PHEVs) worldwide hit a new record of 1.4 million units, up from 1.1 million units in November 2022. The sales are expected to remain robust in December as well.
Driving this surge in EV adoption are the advantageous tax incentives offered on their purchase, recently extended even to used vehicles. Additionally, state-of-the-art digital technologies like the Internet of Things (IoT), AI, and blockchain are ushering in significant transformations in the manufacturing processes within the automotive industry.
In light of these encouraging trends, let's look at the fundamentals of the three Auto & Vehicle Manufacturers stocks, beginning with number 3.
Stock #3: Isuzu Motors Limited (ISUZY)
Headquartered in Yokohama-shi, Japan, ISUZY is a global manufacturer of commercial vehicles, light commercial vehicles, diesel engines, and components. Their product range includes trucks, buses, SUVs, and industrial engines. The company also offers after-sales services, vehicle leasing, and maintenance contracts.
The company pays $0.58 dividends annually, equating to a yield of 4.53% on the current market price. Its four-year average dividend yield is 3.78%. ISUZY’s dividend payments grew at 29.2% and 4.7% CAGRs over the past three and five years, respectively.
ISUZY’s trailing-12-month ROCE, ROTC, and ROTA of 12.39%, 8.51%, and 5.24% are 8.6%, 41%, and 31.4% higher than the industry averages of 11.40%, 6.04%, and 3.99%, respectively. Its trailing-12-month EBIT margin of 8.52% is 13.6% higher than the industry average of 7.50%.
Its revenue and EBITDA grew at 21.7% and 33.6% CAGR over the past three years, respectively. Over the past three and five years, ISUZY’s total assets grew at 16.3% and 9.3% CAGRs, respectively.
During the six months that ended September 30, 2023, ISUZY generated net sales of ¥1.64 trillion ($11.55 billion), up 9.7% year-over-year. Its gross profit and operating income grew 17.8% and 27.6% year-over-year to ¥327.93 billion ($2.31 billion) and ¥143.20 billion ($1.01 billion), respectively.
Net Income attributable to owners of parent and net income per share stood at ¥88.11 billion ($621.24 million) and ¥113.66, both up 20.7% year-over-year. The company’s cash and cash equivalents at the end of the period amounted to ¥379.44 billion ($2.68 billion), up 5.7% from the prior-year period.
Street expects ISUZY’s revenue to grow 151.2% year-over-year to $24.19 billion for the fiscal year ending March 2024. The company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
Shares of ISUZY soared 8.1% year-to-date to close the last trading session at $12.55. Over the past nine months, it gained 3.9%.
ISUZY’s POWR Ratings reflect its robust prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
ISUZY has an A grade for Value and a B for Stability and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #6 among 52 stocks.
In addition to the POWR Ratings stated above, one can access ISUZY’s additional Growth, Momentum, and Sentiment ratings here.
Stock #2: 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.
The company pays $2.88 dividends annually, equating to a yield of 1.87% on the current market price. Its four-year average dividend yield is 2.03%.
SZKMY’s trailing-12-month ROTC and ROTA of 7.54% and 4.68% are 24.9% and 17.4% higher than the industry averages of 6.04% and 3.99%, respectively. Its trailing-12-month EBIT margin of 8.33% is 11.1% higher than the industry average of 7.50%.
Its revenue and EBITDA grew at 18.4% and 24.1% CAGR over the past three years, respectively. Over the past three and five years, SZKMY’s total assets grew at 10.2% and 9.3% CAGRs, respectively.
During the six months ended September 30, 2023, SZKMY’s net sales increased 15.6% year-over-year to ¥2.56 trillion ($18.08 billion). The company’s gross profit for the period increased 21.2% year-over-year to ¥665.83 billion ($4.69 billion). Profit attributable to owners of parent increased 12.4% year-over-year to ¥129.35 billion ($912.02 million).
During the same period, net cash provided by operating activities stood at ¥196.13 billion ($1.38 billion), up 36.9% year-over-year.
Street expects SZKMY’s revenue to increase 2.5% year-over-year to $9.35 billion for the fiscal third quarter ending December 2023. Also, the company topped the consensus revenue estimates in all the trailing four quarters.
Over the past nine months, the stock has gained 10.4% to close the last trading session at $154.37. The stock has gained 20.1% year-to-date.
SZKMY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Stability and a B in Growth, Value, and Quality. It is ranked #3 in the same industry.
Click here to see the other ratings of Sentiment and Momentum.
Stock #1: 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.
The company’s board of directors declared a quarterly dividend of $0.05 per share of common stock, payable to the shareholders on January 12, 2024. The company pays $0.20 annually as dividends, equating to a yield of 1.08% on the current market price. Its four-year average dividend yield is 1.51%. REVG’s dividend payments grew at a 10.1% CAGR over the past three years.
REVG’s trailing-12-month asset turnover ratio of 1.89x is 137.3% higher than the 0.80x industry average. Its revenue and EBITDA grew at 5% and 31.5% CAGR over the past three years, respectively.
For the fiscal fourth quarter that ended October 31, 2023, REVG’s net sales stood at $693.30 million, up 11.2% year-over-year. Its gross profit and operating income stood at $95.50 million and $45.10 million, up 43% and 152% from the year-ago quarter, respectively.
Its adjusted net income and adjusted net income per common share stood at $31.70 million and $0.53, up 95.7% and 89.3% from the same period last year, respectively. As of October 31, 2023, REVG’s long-term debt stood at $150 million, compared to $230 million as of October 31, 2022.
Street expects REVG’s revenue to be $576.99 million in the fiscal first quarter that ended January 2024, while EPS is expected to rise 16.7% year-over-year to $0.14. It surpassed the consensus revenue and EPS estimates in each of the four trailing quarters.
The stock has gained 60% over the past nine months and 48.1% year-to-date to close the last trading session at $18.69.
REVG’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Stability, and Quality. It is ranked first within the same industry.
Access REVG’s Momentum and Sentiment ratings here.
What To Do Next?
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SZKMY shares . Year-to-date, SZKMY has gained 20.89%, versus a 24.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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