Navistar International Corp (NAV): This Truck Business Could Surge on Its Turnaround

The smallest and the cheapest company

Compared to its peers including BAE Systems PLC (ADR) (OTCMKTS:BAESY) and PACCAR Inc (NASDAQ:PCAR), Navistar is the smallest company and has the lowest price-to-sales multiple.

BAE Systems is trading at around $23.90 per share, with a total market cap of $19.40 billion. The market values BAE Systems at 0.73 times its sales and 5.9 times its trailing EBITDA. BAE Systems is considered a global defense, aerospace and security company, operating in several business segments including Electronic Systems, Cyber & Intelligence and Platforms & Services. What I like about BAE Systems is its share buyback plan initiation. In the next three years, BAE Systems intends to buy back up to £1 ($1.54) billion worth of stock. BAE Systems reported that as of May 7th, the company has already repurchased 17 million shares with the total cost of £65 ($100.2) million under this program. The total share buyback plan could yield up to 7.9% for shareholders on the current trading price.

PACCAR is trading at $51.10 per share, with a total market cap of around $18 billion. The market values PACCAR the highest among the three companies at 1.1 times its sales and 11 times its trailing EBITDA. What impresses me  is that the company’s consistent profit generation. It has had 74 consecutive years of net profit. Moreover, the company has paid uninterrupted dividends since 1941. At its current trading price, PACCAR offers investors a dividend yield at 1.5%.

Among the three companies, BAE Systems is the most profitable company with the highest return on invested capital at 13.15%. PACCAR ranked second with much lower ROIC at only 6.86%, while Navistar is currently generating losses, with negative return.

My Foolish take

Navistar International Corp (NYSE:NAV) could be considered an opportunistic play on the company’s turnaround. With the cheapest price-to-sales ratio, the ongoing business restructuring and the urge of two activist investors, Navistar could surge dramatically when its business performance begins to improve.

The article This Truck Business Could Surge on Its Turnaround originally appeared on Fool.com.

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