Cisco Systems, Inc. (CSCO), Google Inc (GOOG), International Business Machines Corp. (IBM): A Big Alliance?

Continental already has an alliance with Cisco Systems, Inc. (NASDAQ:CSCO), the leading network equipment maker, to work on systems for communication between vehicles, which many view as key in the development of autonomous vehicles. So, Cisco Systems, Inc. (NASDAQ:CSCO) is worth watching here, too.

Here’s the longer-term stock performance picture. Given its business, one would expect the stock to be very cyclical and move in-line with manufacturers of autos and commercial vehicles. For context, Ford and Volvo are included. (Volvo’s a commercial vehicle manufacturer; it divested its passenger vehicle business in 2005.)

YCharts

Continental’s stock has been turbocharged over the past year, not surprising given the automakers have generally been on fire. (Ford, GM and VW are up 73%, 65%, and 46%, respectively.) EPS is growing faster than revenue — so margins have expanded. Continental has been investing heavily in R&D for driver assistance systems, which has affected results. However, given its recent alliance with Cisco Systems, Inc. (NASDAQ:CSCO) and reported alliance with Google, the investment appears to be paying off.

YCharts

As to other basic metrics: Operating and profit margins are 9.4% and 6.2%, respectively, for the trailing twelve months. ROE is a solid 24.8%. Revenue and net income were up 4.3% and 34.7%, respectively, in Q2. Debt-to-equity is 0.92.

Valuation is reasonable with the PE, forward PE, and 5-year PEG at 12.2, 9.7, and 1.1, respectively.

Takeaways

Google Inc (NASDAQ:GOOG)’s role in self-driving vehicle technology is well-known, so International Business Machines Corp. (NYSE:IBM), Cisco Systems, Inc. (NASDAQ:CSCO), and Continental could be the investment angle sleepers here.

As to the larger picture, one thing is for certain: The line between the auto and technology industries continues to become increasingly blurred.

The article Google, IBM, & Continental AG Teaming up on Self-Driving Vehicles? originally appeared on Fool.com and is written by BA McKenna.

BA McKenna has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Google. The Motley Fool owns shares of Google and International Business Machines (NYSE:IBM).

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