The growing per capita income worldwide is driving higher demand for cars in the global market. In developed nations, passenger vehicles are the most common form of transportation. The automotive sector has experienced significant adoption of advanced technologies, such as Advanced Driver Assistance Systems (ADAS).
Additionally, the increasing use of electric vehicles is boosting the demand for automobiles. The global automotive industry is expected to grow at a CAGR of 6.8%, reaching $6.86 trillion by 2033. Also, the emergence of a new business model characterized by integration, service connectivity, and innovation is poised to revolutionize the automotive industry.
Against this backdrop, let’s compare two established auto stocks to analyze which auto stock has the better long-term potential: Stellantis N.V. (STLA) and Isuzu Motors Limited (ISUZY).
The Case for Stellantis N.V. Stock
With a $39.89 billion market cap, Stellantis N.V. (STLA) designs, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems worldwide. The company is headquartered in Hoofddorp, the Netherlands.
On September 30, 2024, STLA announced that Leapmotor International had opened orders for the T03 and C10 electric vehicles in Europe through STLA’s brand dealers. This joint venture aims to expand global sales of affordable, high-tech electric vehicles, with deliveries expected later this year.
STLA’s stock has plunged 40.9% over the past nine months to close the last trading session at $13.63.
In terms of forward non-GAAP P/E, STLA’s 3.78x is 77.9% lower than the 17.06x industry average. Its 1.52x forward EV/EBITDA is 85.1% lower than the 10.16x industry average. Likewise, its 2.31x forward EV/EBIT is 84.8% lower than the 15.14x industry average.
STLA’s net revenues for the first half ended June 30, 2024, stood at €85.02 billion ($94.91 billion). Its net profit attributable to the owners of the parent was €5.62 billion ($6.27 billion), and its adjusted operating income came in at €8.46 billion ($9.44 billion). Furthermore, the company’s adjusted EPS was €2.36.
Street expects STLA’s EPS and revenue for fiscal 2025 to increase 38.3% and 4.7% year-over-year to $4.44 and $189.32 billion, respectively. However, its revenue for the third quarter ended September 2024 is expected to decrease 20.2% year-over-year to $38.11 billion.
STLA’s POWR Ratings reflect mixed prospects. It has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
STLA is ranked #18 out of 53 stocks in the Auto & Vehicle Manufacturers industry. It has a C grade for Quality, Sentiment, and Stability. To see STLA’s Growth, Momentum, and Value ratings, click here.
The Case for Isuzu Motors Limited Stock
Valued at $10.16 billion by market cap, Isuzu Motors Limited (ISUZY) manufactures and sells commercial vehicles, light commercial vehicles, and diesel engines and components worldwide. Its products include heavy-duty and medium-duty trucks, buses, light-duty trucks, passenger pickup vehicles, pickup trucks, SUVs, and marine and industrial engines. The company is headquartered in Yokohama-shi, Japan.
ISUZY’s stock has gained 12.4% over the past year to close the last trading session at $13.63.
ISUZY’s forward EV/EBITDA of 4.79x is 52.8% lower than the 10.16x industry average. Likewise, its 6.36x forward EV/EBIT is 58% lower than the 15.14x industry average.
ISUZY’s net sales for the fiscal first quarter ended June 30, 2024, increased 3.1% year-over-year to ¥775.47 billion ($5.34 billion). Its ordinary income stood at ¥74.89 billion ($516.17 billion), and profit attributable to owners of the parent at ¥45.04 billion ($310.43 billion).
Analysts expect ISUZY’s revenue for the quarter ended September 30, 2024, to increase 2% year-over-year to $5.75 billion.
ISUZY’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to Buy in our proprietary rating system.
ISUZY has an A grade for Value and a B for Stability and Quality. It is ranked #6 in the same industry.
Click here for the additional POWR Ratings for ISUZY (Momentum, Sentiment, and Growth).
Stellantis (STLA) vs. Isuzu Motors (ISUZY): Which Auto Stock Has the Better Long-Term Potential?
The auto and vehicle manufacturing industry is growing due to rising demand for electric vehicles and the adoption of advanced technologies like autonomous driving and ADAS. Increased urbanization, global demand, and regulatory pushes for sustainability further fuel this growth.
Leading auto companies STLA and ISUZY stand to capitalize on the optimistic industry outlook. However, ISUZY’s higher profitability and promising near-term outlook favor it as the better audio stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturers industry 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 $13.08 per share on Thursday afternoon, down $0.55 (-4.04%). Year-to-date, STLA has declined -43.91%, versus a 20.32% 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.
Stellantis (STLA) vs. Isuzu Motors (ISUZY): Which Auto Stock Has the Better Long-Term Potential? StockNews.com
