1. Garrett Motion Inc. (NYSE:GTX)
Market Cap: $1.96 billion
Forward P/E: 8
Number of Hedge Fund Holders: 34
Based in Switzerland, Garrett Motion Inc. (NASDAQ:GTX) is a Switzerland-based automotive technology company specializing in turbocharging and electric boosting technology for vehicles. It designs and manufactures turbochargers, which increase engine power output by forcing more air into the combustion chamber. The company produces turbochargers for engines powered by gasoline, diesel, natural gas, and even hybrid or fuel cell systems. In addition, it provides services and products for the connected vehicle market, including integrated vehicle health management (IVHM) and software focused on automotive cybersecurity.
The company has numerous R&D centers, engineering facilities, and factories worldwide. It also boasts a large distribution network and maintains strong partnerships with global and Chinese automakers through its diverse range of turbocharging solutions. Despite a challenging market environment, Garrett Motion Inc. (NASDAQ:GTX) reported robust financial results in fiscal Q3 2024. Although net sales were down from last year due to industry softness and competitive pressures on global OEMs, it delivered a strong adjusted EBITDA margin of 17.4%. This reflects a notable year-over-year improvement driven by the successful implementation of sustainable fixed-cost actions and investments in new technologies.
Garrett Motion Inc. (NASDAQ:GTX) is seeing accelerating momentum in zero-emission vehicle technologies, directing more than half of all its R&D spending in 2024 toward it and earning a bullish analyst sentiment. In September 2024, Garrett Motion Inc. (NASDAQ:GTX) signed a letter of intent with SinoTruk to boost cooperation on electric commercial vehicles. Both companies aim to jointly co-develop a leading next-generation electric powertrain and mass-produce e-trucks equipped with this next-gen E-powertrain by 2027. This alliance is expected to expand the adoption of zero-emission technologies in China’s commercial vehicle market.
Alluvial Capital Management stated the following regarding Garrett Motion Inc. (NASDAQ:GTX) in its first quarter 2024 investor letter:
“Garrett Motion Inc. (NASDAQ:GTX) delivered nice results in February. The company issued strong guidance for 2024 and best of all, indicated it would use nearly all its 2024 free cash flow to repurchase stock. The company wasted no time, buying back a whopping 10 million shares for $90 million on March 6. Garrett will continue to harvest the cash flows from its dominant turbochargers business, investing in creating products for electric vehicles and returning excess cash to shareholders. Investors seem to be waking up to the reality that while electric vehicles are a near-inevitability, it will be a long time still before internal combustion engines lose their relevance. By the time they do, Garrett Motion will have completed the transition to an electric vehicle equipment manufacturer and will have returned billions in capital to investors.”
Overall, GTX ranks first among the 10 most undervalued small-cap stocks to invest in. While we acknowledge the potential of undervalued small-cap stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GTX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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