7 Most Undervalued Auto Stocks To Buy According To Analysts

3. Honda Motor Co., Ltd. (NYSE:HMC)

Number of Hedge Fund Holders: 12

Forward PE Ratio: 6.71

Average Price Target Upside: 25.62%

Honda Motor Co., Ltd. (NYSE:HMC) is a Japanese multinational conglomerate, mostly recognized for its automobiles, motorcycles, and internal combustion engines. While the company has a remarkable portfolio of ICE and hybrid vehicles, the company has solid plans to become a major EV producer. With average price target upside of 25.62%, it is the 3rd most undervalued auto stock to buy.

The company is committed to achieving full electrification by 2040, aiming for all global sales to come from BEVs and Fuel Cell Electric Vehicles (FCEVs). Despite a perceived EV slowdown, the company expects a steady shift toward EVs in the coming years.

To stay competitive, especially against emerging Chinese manufacturers, Honda (NYSE:HMC) is focusing on the full EV lifecycle, including battery value chains, production technology, and charging infrastructure. It plans rapid EV launches by 2026 and aims to strengthen its EV brand by 2030 while using its ICE business to fund future electrification efforts.

According to Honda Report 2024, the company will invest 10 trillion yen (1 Yen = US $0.0068) in electrification and software by 2031, with 3.5 trillion yen allocated by 2026 and 6.5 trillion yen after that. These funds will support competitive EV development, reduce costs, and build a vertically integrated EV value chain.

Moreover, shareholder returns, including dividends of over 1.3 trillion yen from 2022 to 2026, will remain a priority, with share repurchases used to improve capital efficiency. Honda (NYSE:HMC) is focused on achieving a return on invested capital of 10% or higher by 2031 as it transitions from ICE to EVs.

It plans to generate 12 trillion yen in cash flows by March 2026 and more in the following five years, driven by internal combustion engine and EV growth.

In the short term, the company is aiming for an operating income of 1.42 trillion yen and a 7% revenue on-sales target, for the fiscal year ending March 31, 2025. Shareholder returns will include a dividend of 68 yen and a 300 billion yen share repurchase.