We recently compiled a list of the 7 Best Small Cap Automotive Stocks to Buy. In this article, we are going to take a look at where Blue Bird Corporation (NASDAQ:BLBD) stands against the other small cap automotive stocks.
The International Automotive Industry
The automotive industry is one of the fastest-growing industries, especially with the recent surge in demand for Electric Vehicles (EVs) across the globe. According to a report published by Fintech Futures, the global automotive industry was valued at $4.4 trillion in 2024. The market is expected to grow at a compound annual growth rate of 5.66% to reach $6.7 trillion by 2032. The recent trend of EVs, autonomous vehicles, and innovative technology has revolutionized the automotive sector. The transformation is expected to boost auto revenues by nearly 30% during the projected period.
The international automotive industry market share has been changing drastically during the year. According to a CNBC report published on June 14, Chinese automakers have overtaken the US in terms of sales for the first time. Chinese automakers, led by BYD, sold 13.4 million new vehicles in 2023 surpassing 11.9 million vehicles sold by their US counterparts. On the other hand, the Japanese automotive industry stood undefeated by selling 23.59 million new vehicles during the same year. Moreover, China’s sales growth also outperformed that of the US. The country grew its automotive sales by 23% during the year as compared to a 9% growth by the US.
China has been focusing on growing its exports of the automotive industry to capture the international market. According to another CNBC report published on June 27 Chinese automakers are expected to achieve 33% of the global automotive market share by 2030. As of 2024, China has already captured 21% market share and sales of automobiles outside of China are expected to grow from 3 million this year to 9 million by 2030. Currently, around 59% of Chinese automotive sales come from within the country, with Russia being the largest market for Chinese automotive at 33%. If you want to read more about automotive industry trends you can look at the Top 18 Automotive Industry Innovations and Trends.
The US Automotive Industry Outlook
The United States is one of the key players in the international market. According to a report by Alliance for Automotive Innovation, the sales of new vehicles in the month of June dropped 3.4% year-over-year amounting to 1.32 million. The slow down in the sales is mainly attributed to higher prices and interest rates that hinder a stronger market. However, the full year sales estimates look better, with new vehicle sales expected to reach 16.1 million during the year, indicating a 12.4% increase from last year. On the other hand, on June 25 Reuters reported that uncertainty looms in the US automotive industry as the upcoming elections are expected to reshape the US economy. Cox Automotive reiterated its full year 2024 guidance at 15.7 million units.
The US consumer market has been reluctant to purchase vehicles due to inflation, and some shoppers are expected to keep holding back due to election uncertainty. As per Reuters, around 74% consumers and 81% dealers believe that inflation is the top concern and that the election is likely to influence it. This has led to a sell-off in auto stocks and many companies with strong fundamentals are now available at cheaper prices. With that, let’s now look at the 7 best small cap automotive stocks to buy.
Our Methodology
To compile the list of best small cap automotive stocks to buy we used Yahoo Finance and Finviz stock screeners. We set the market cap range between $250 million to $2 billion to get small cap stocks only. We checked auto manufacturers, auto and truck dealerships, and also auto parts for this article. Once we had a consolidated list of small cap automotive stocks, we selected and ranked the stocks that were the most widely held by institutional investors, as of Q1 2024. The list is in ascending order of the number of hedge funds holders for each stock.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A group of school buses lined up in front of a large building, painted in bright colors.
Blue Bird Corporation (NASDAQ:BLBD)
Number of Hedge Funds Holders: 27
Blue Bird Corporation (NASDAQ:BLBD) is another best small cap automotive stock to buy. The company has a market capitalization of $1.504 billion as of August 4, 2024.
Blue Bird Corporation (NASDAQ:BLBD) is a leading manufacturer of school buses in the United States and operates by designing, manufacturing, and selling type C, type D, and speciality school buses. Apart from the traditional diesel engine buses, the company also provides alternative fueling options such as electric power, propane, gasoline, and compressed natural gas engines. Blue Bird Corporation (NASDAQ:BLBD) also operates in replacement parts for its vehicles and provides bus finance and extended warranties services. The company serves a network of dealers, fleet operators, government agencies, and independent service centers.
The company posted a record-breaking second quarter of 2024. Blue Bird Corporation (NASDAQ:BLBD) grew its net sales by 15% to a record-high $346 million during the quarter. The increase in revenue was on the back of 2,254 buses sold during the quarter, which was slightly down versus the last year, but 6% above Q1 sales. The company was able to achieve record revenue despite lower bus volume sold as compared to last year due to higher bus pricing. The increase in bus prices also resulted in the company generating $46 million in adjusted EBITDA almost double versus last year and well above the guidance range of $25 million to $35 million. Blue Bird Corporation has been doing well in keeping up its order backlog despite the price hike, which demonstrates strong market demand for its buses. The firm order backlog was worth $850 million at the end of Q2 reflecting 5,900 buses in the order backlog, almost 30% higher than the previous quarter.
The competitive edge of the company lies in its ability to provide alternative fueling options, especially the electric power buses. During the second quarter the electric bus deliveries for the company reached an all time high and accounted for 9% of total units sold. The company has raised its full year guidance and expects revenue of $1.3 billion and an adjusted EBITDA of $145 million to $165 million.
The company has significant room for growth as it has $79 million in cash and cash equivalents and grew its free cash flow by $30 million year-over-year. This strong financial position puts the company at a sweet spot to capitalize on the growing demand of school buses.
BLBD provides an attractive entry point for investors as it is trading at 17 times its forward earnings, an 8% discount to its sector, and has a history of growing its top line and bottom line. The company has grown its revenue by 4.5% and net income by 18% during the past 5 years. 7 Analysts hold a Strong Buy rating on the stock and their average price target of $60 represents an upside of 28.81% from current levels.
BLBD was held by 27 hedge funds during the Q1 of 2024, with total stakes worth $215.8 million. Of those, 325 Capital was the dominant shareholder in the company and held a stake worth $44.6 million.
Overall BLBD ranks 3rd on our list of the best small cap automotive stocks to buy. You can visit 7 Best Small Cap Automotive Stocks to Buy to see the other small cap automotive stocks that are on hedge funds’ radar. While we acknowledge the potential of BLBD to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BLBD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
