In this article, we will look at 10 best undervalued automobile stocks to buy now. If you want to skip our detailed analysis of the automobile industry, you can go directly to 5 Best Undervalued Automobile Stocks to Buy Now.
According to IBISWorld, the global car and automobile manufacturing industry is worth $2.9 trillion by revenue in 2022. It is estimated that by the end of 2022, the global car and automobile manufacturing industry will grow by 3.1%, after declining by an average of 0.6% per year over the past 5 years up till 2022.
The COVID-19 pandemic had a severe impact on the global automobile industry. New car registrations declined the most in 2020 than they had in the past two decades, according to BBC, and dropped to 1.63 million in 2020 from 2.3 million in 2019. Moving on to 2021, when lockdowns were lifted and operations resumed, the global automobile industry began its slow recovery process and reportedly experienced 1.65 million new car registration in 2021, up only 1% since the pandemic, and down 28.7% since pre-pandemic levels.
Fast forward to 2022, the global automobile industry is faced with the challenges of rising interest rates, high inflation, Covid-related lockdowns in China, and a global semiconductor shortage among others. The automobile industry is severely beaten-down and major players like Ford Motor Company (NYSE:F), Stellantis N.V. (NYSE:STLA), and General Motors Company (NYSE:GM) are currently trading at a discount, making now the optimal time to buy these dips that have long-term potential.
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Our Methodology
To determine the 10 best undervalued automobile stocks to buy now, we looked at the trailing-twelve-month PE ratios of major players in the global automotive industry. We also gave weight to the analyst and investor sentiment around each stock. We believe analyst and investor sentiment are critical indicators to determine a stock’s profitability. These stocks are ranked in descending order of their respective price-to-earnings ratios.
The hedge fund sentiment was sourced from Insider Monkey’s database, which as of Q1 2022, tracks roughly 900 elite hedge funds.
Best Undervalued Automobile Stocks to Buy Now
10. PACCAR Inc (NASDAQ:PCAR)
PE Ratio as of July 8: 14.25
Number of Hedge Fund Holders: 30
PACCAR Inc (NASDAQ:PCAR) designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks in the United States, Europe, Mexico, South America, Australia, and internationally. It operates through three primary segments: Truck, Parts, and Financial Services.
On July 7, Cowen analyst Matt Elkott trimmed his price target on PACCAR Inc (NASDAQ:PCAR) to $92 from $100 and reiterated a Market Perform rating on the shares.
As of July 8, PACCAR Inc (NASDAQ:PCAR) has a trailing-twelve-month PE ratio of 14.25 and is offering a forward dividend yield of 1.68%, which makes it rank among the best undervalued automobile stocks to buy now.
At the end of the first quarter of 2022, 30 hedge funds were long PACCAR Inc (NASDAQ:PCAR) with stakes worth $253.15 million. This is compared to 34 positions in the previous quarter with stakes worth $380.39 million.
As of March 31, Harris Associates is the largest shareholder in PACCAR Inc (NASDAQ:PCAR). The fund’s stakes were valued at $184.06 million, up 2% from its prior stakes. The investment covers 0.24% of Harris Associates’ 13F portfolio.
Like Ford Motor Company (NYSE:F), Stellantis N.V. (NYSE:STLA), and General Motors Company (NYSE:GM), PACCAR Inc (NASDAQ:PCAR) is trading at bargain levels right now and is presenting an attractive entry point for investors looking to invest in the consumer discretionary sector.
9. Oshkosh Corporation (NYSE:OSK)
PE Ratio as of July 8: 13.71
Number of Hedge Fund Holders: 28
Oshkosh Corporation (NYSE:OSK) designs, manufactures, and markets specialty vehicles and vehicle bodies worldwide. At the close of Q1 2022, 28 hedge funds were bullish on Oshkosh Corporation (NYSE:OSK) with stakes worth $130.79 million. This is compared to 26 hedge funds in the prior quarter with stakes worth $220.45 million.
On May 6, Oshkosh Corporation (NYSE:OSK) announced that it plans to allocate 100% of its free cash flow to M&A activity and shareholder returns. The company’s board of directors authorized an increase of the Oshkosh Corporation’s (NYSE:OSK) current share repurchase authorization by 8 million, bringing its total authorization to 12 million shares.
As of June 30, Citi analyst Timothy Thein has a $90 price target and a Neutral rating on Oshkosh Corporation (NYSE:OSK).
As of March 31, AQR Capital Management is the largest stakeholder in Oshkosh Corporation (NYSE:OSK) and has stakes worth $34.65 million in the company.
As of July 8, Oshkosh Corporation (NYSE:OSK) has a trailing-twelve-month PE ratio of 13.71 and a forward dividend yield of 1.83%.
Here is what FPA Queens Road, an investment management firm, had to say about Oshkosh Corporation (NYSE:OSK) in its first-quarter 2022 investor letter:
“Oshkosh Corporation (NYSE:OSK), a specialty vehicle manufacturer, fell during the year as the company’s performance was impacted by chassis and component shortages. Given its strong backlog and competitive position within its markets, we think the company remains an attractive opportunity.”
8. The Shyft Group, Inc. (NASDAQ:SHYF)
PE Ratio as of July 8: 13.18
Number of Hedge Fund Holders: 17
The Shyft Group, Inc. (NASDAQ:SHYF) manufactures and assembles specialty vehicles for the commercial vehicle and recreational vehicle industries in the United States and internationally. The company has two business segments: Fleet Vehicles & Services, and Specialty Vehicles. As of February 25, Raymond James analyst Felix Boeschen has a Strong Buy rating and a $57 price target on The Shyft Group, Inc. (NASDAQ:SHYF).
As of July 8, The Shyft Group, Inc. (NASDAQ:SHYF) has a forward dividend yield of 1.03% and a trailing-twelve-month PE ratio of 13.18.
At the close of Q1 2022, 17 hedge funds held stakes in The Shyft Group, Inc. (NASDAQ:SHYF). The total value of these stakes came in at $103.05 million, down from $132.39 million in the preceding quarter with 15 positions.
As of Q1 2022, Driehaus Capital is the most prominent shareholder in The Shyft Group, Inc. (NASDAQ:SHYF). The fund owns 1.13 million shares of the company which amounts to a stake of $40.85 million.
Artko Capital, an asset management firm, mentioned The Shyft Group, Inc. (NASDAQ:SHYF) in its fourth-quarter 2021 investor letter. Here is what the firm had to say:
“Shyft Group (SHYF) – 8.5% of Portfolio; $9.50 cost basis/$43.00 current price
Shyft Group continued to be the resounding winner in our partnership’s history, rising 73% in 2021, over 400% in our cost basis, and over 500% from our initial investment at $8.00 in mid-2017. It is our biggest holding by market capitalization at $1.5 billion, though of course at just $280mm when we first invested in the company. As a reminder SHYF designs, engineers, manufactures, and services purpose-built specialty vehicles and chassis through its Fleet Vehicles and Service (FVS) segment for companies like UPS and Amazon and the Specialty Vehicles (SV) segment which helps to build bodies for commercial trucks, RV homes, and construction vehicles.
The company continued to deliver in 2021, with 3rd quarter revenue growth of 34% and 42% on the first nine months of 2021 and raised its year-end guidance from $925mm to $950mm as well as its EBITDA/EPS numbers to $109mm/$1.99 from $105mm/$1.85. These are incredible numbers considering in 2017 the company had less than $30mm in EBITDA and $0.46 in EPS. With the leadership of their impressive CEO, Daryl Adams, the company has transformed itself by divesting its loss-making Emergency Vehicle Segment; substantially improving operations through Daryl’s manufacturing expertise; and executing on four relatively small tuck-in acquisitions, while riding the incredible 12% organic CAGR demand for major career fleets driven by the replacement cycle and a 10% CAGR in US package volume. While the company’s stock price appreciated through its substantial growth in profitability, of course, it also benefited from multiple expansions from mid-single digit EBITDA multiples to low to mid-teens today. As always, after a run-up like this, we like to make sure that the thesis is still intact. We believe that while the current inflationary pressures are important, the company is capable of managing them while continuing to ride the demand for FVS which we do not see abating, as well as introducing Electric Vehicle products for all sizes of class of commercial vehicles. We do not believe that the company’s 2025 targets of $1.75 billion in revenue and $265mm in EBITDA (i.e. 25% CAGR) are overly aggressive as the company continues to gain operating leverage and, keeping the current forward multiples in the current low teens, should result in another doubling of the stock to $90 per share. After taking consistent profits from this position over the years, we are comfortable with the current weighting in the portfolio and look forward to seeing Mr. Adams continue to execute as he has impressively done in the past.”
7. Toyota Motor Corporation (NYSE:TM)
PE Ratio as of July 8: 10.35
Number of Hedge Fund Holders: 9
On July 1, Toyota Motor Corporation (NYSE:TM) reported that it experience declining sales volumes in the U.S. in June. The company reported sales of 170,155 vehicles, down 17.9% year over year. The company reported that it sold roughly 40,000 electrified vehicles in June 2022, which represents 23.5% of its total monthly sales. Toyota Motor Corporation (NYSE:TM) noted that despite facing inventory challenges in 2022 so far, the company managed to launch new products such as the Toyota battery electric bZ4X, Tundra, and the hybrid Tundra, and also said that its consumers can expect further products by the end of 2022.
As of May 31, JPMorgan analyst Akira Kishimoto has a buy-side Overweight rating and a 2,600 yen price target on Toyota Motor Corporation (NYSE:TM).
As of July 8, Toyota Motor Corporation (NYSE:TM) has a forward dividend yield of 2.81% and a trailing-twelve-month PE ratio of 10.35.
Hedge funds are raising their stakes in Toyota Motor Corporation (NYSE:TM). At the end of Q1 2022, 9 hedge funds held stakes in Toyota Motor Corporation (NYSE:TM) worth $952.85 million. This is compared to 12 hedge funds in the previous quarter with stakes worth $943.76 million.
In Q1 2022, Ken Fisher’s Fisher Asset Management raised its stakes in Toyota Motor Corporation (NYSE:TM) by 4%, bring them to $925.65 million. Fisher Asset Management is the largest shareholder in the company.
Here is what Baron Funds, an asset management firm, had to say about Toyota Motor Corporation (NYSE:TM) in its first-quarter 2022 investor letter:
“Toyota’s (NYSE:TM) “kaizen” manufacturing philosophy is based on improving manufacturing by using “just in time” processes to eliminate waste and reduce inventory carrying costs. Clearly the company does not contemplates disruptive change that will dramatically lower costs and improve quality.”
6. Nissan Motor Co., Ltd. (OTC:NSANY)
PE Ratio as of July 8: 9.57
Number of Hedge Fund Holders: N/A
Nissan Motor Co., Ltd. (OTC:NSANY) manufactures and sells vehicles and automotive parts worldwide. It is the sixth-best undervalued automobile stock to buy right now because, as of July 8, the stock has a trailing-twelve-month PE ratio of 9.57.
Analysts are bullish on Nissan Motor Co., Ltd. (OTC:NSANY). As of April 25, Citi analyst Itay Michaeli has a $31 price target and a Buy rating on Nissan Motor Co., Ltd. (OTC:NSANY).
On May 20, Nissan Motor Co., Ltd. (OTC:NSANY) released a new EV in Japan, the Nissan Sakura. The Nissan Sakura is the company’s first battery-electric offering and carries a price tag of $14,000. The car has an electric range of 180 km, a horsepower rated at 63 hp, and a sports mode as well.
On July 1, Nissan Motor Co., Ltd. (OTC:NSANY) announced that the company’s Q2 2022 sales in the U.S. declined by 38.6% year over year and came in at roughly 183,000 units.
Nissan Motor Co., Ltd. (OTC:NSANY), Ford Motor Company (NYSE:F), Stellantis N.V. (NYSE:STLA), and General Motors Company (NYSE:GM) are some of the best undervalued automobile stocks to buy right now.
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Disclosure: None. 10 Best Undervalued Automobile Stocks to Buy Now is originally published on Insider Monkey.
