Sunday, 30. April 2017  
16.03.2016 22:59
Author: Nic Wright

STOCK SCREEN: Automobile Stocks With Strong Balance Sheets And Solid Margin-Of-Safety

 

Judged by the latest industry numbers, the U.S. auto sector looks set for another good year, backed by rising employment and personal income as well as low fuel prices and easy availability of credit. U.S. light-vehicle sales increased 6.8% year over year to 1.3 million units in Feb 2016, the highest February sales since 2001.

Among the six major American and Japanese automakers, Ford recorded the maximum year-over-year sales improvement in Feb 2016, with  a 20.4% increase in U.S. sales from the year-ago period, followed by Fiat Chrysler recording a 12% year-over-year rise.

While industry data look encouraging, the sector was not able to perform better than the broad market, partly due to a significant deterioration in credit markets since summer last year, which is posing a threat to global car sales volumes, mix, ASPs, and auto OEM margins. The key question is how much has been priced in already?

In looking for ideas this week, we screen the auto sector for stocks with significant upside according to our fundamental fair value estimates. Of course, potential future fines have to be considered additionally, when looking at fundamental, i.e. income based, fair value estimates.

 

Here are the filter criteria:

1. Market capitalization above 1bn.

2. Net Cash on balance sheet, respectively net debt-ebitda ratio negative.

3. At least 20 percent Upside to Intrinsic Stock Value according to our AVM’s Greenblatt inspired estimate.

 

Here is our list of stocks matching all criteria in alphabetical order. Company names in the table below are linked to the ANALYZER, our single stock analysis tool. Intrinsic Value Model assumptions can be adapted in the MODELER, our modeling and forecasting environment:

CLICK COMPANY NAME FOR DETAILED STOCK VALUE ANALYSIS

LAST PRICE

MEAN MULTIPLE UPSIDE [%]

GRAHAM UPSIDE [%]

GREENBLATT UPSIDE [%]

DIVIDEND YIELD [%]

NETDEBT / EBITDA

 BAYERISCHE MOTOREN WERKE AG

81.39

165.8

72.4

136.9

4.1

-1.0

 DAIMLER AG-REGISTERED SHARES

66.96

30.6

52.2

91.2

5.1

-0.6

 HYUNDAI MOBIS CO LTD

247500.00

61.2

71.2

68.2

1.6

-1.5

 KIA MOTORS CORPORATION

47550.00

59.7

55.0

150.4

2.7

-0.4

 MITSUBISHI MOTORS CORP

844.00

178.4

34.3

104.3

1.9

-2.0

 VOLKSWAGEN AG-PREF

115.99

381.0

124.5

172.1

2.0

-0.7