The firm leads in overall electric vehicle sales with the Leaf (according to the New York Daily News), and on June 20 released an upgrade to the car’s battery. That’s a good sign for investors, as it shows advancements are being made in battery life. A short battery lifespan has been the bane of electric vehicle companies because the perception of the EVs not having much juice has turned buyers away. Each step forward in battery technology should lead to increased sales as concerns about running out of power will wane. By offering a free battery upgrade for American Leaf owners, the company is also building customer loyalty, and that bodes well for future prospects at the firm.
Furthermore, with a price-to-book ratio of 1.1, which is below average in the auto and truck manufacturers sector, the firm looks attractive at its current price and appears undervalued, according to RBC Direct Investing. Add in a price-to-earnings ratio at 12.4 and investors have an average growth expectation from the firm. Purchasing the company now, before the masses catch on to its real growth potential, could result in major profits.
The competition: Tesla Motors Inc (NASDAQ:TSLA)
Tesla Motors Inc (NASDAQ:TSLA) recalled 1,228 units of its luxury electric vehicle, the Model S. The recall was for Model S cars made between May 10 and June 8, and was due to a defect in the mounting bracket on the rear seat. The recall doesn’t effect the mechanics of the vehicle, and shouldn’t be taken as a sign of poor quality. In fact, Tesla Motors Inc (NASDAQ:TSLA) is a stellar company with a lock on the luxury electric vehicle niche and should see increased sales as technology improves.
The firm is outrageously priced, however, and likely doesn’t justify it with growth potential. While Tesla is a leading-edge company, it faces a slew of competition that could just as easily move in on the luxury electric vehicle market. The company has one of the highest price-to-book ratios in the entire vehicle manufacturing sector, at 71.5. That’s nearly a 181% increase from last year. However, sales of the Model S have been stellar, with 8,850 sold in May, according to Reuters — that compares to 7,614 Nissan Leafs and 7,157 Chevrolet Volts.
The competition: General Motors Company (NYSE:GM)
General Motors Company (NYSE:GM), manufacturer of the Chevrolet Volt, cut prices on the 2012 versions of the vehicle by $6,000 on June 16. This has been a common theme in the industry and could indicate more efficient manufacturing and cheaper parts. That’s good news for the industry as a whole and matches the $6,000 Nissan Motor Co., Ltd. (ADR) (OTCMKTS:NSANY) cut to its Leaf, though that could be a sign of the American dollar’s recent increased value in comparison to the Japanese yen (as Nissan is Japanese.)
General Motors Company (NYSE:GM) is attractively valued at first glance due to its upswing potential, though deciding which of the three firms is most attractively priced is matter of which company you think will profit most from electric vehicle sales. The return on equity is low at under 3% and could indicate a problem controlling costs.
All three could be winners
Nissan Motor Co., Ltd. (ADR) (OTCMKTS:NSANY) is my top pick for its current share price. All three companies could see substantial increases in revenue from their electric vehicle operations, but Nissan Motor Co., Ltd. (ADR) (OTCMKTS:NSANY) looks most attractively priced right now when factoring the upswing potential. Furthermore, Nissan Motor Co., Ltd. (ADR) (OTCMKTS:NSANY) currently has a more attractive EV selling price and could compete with General Motors Company (NYSE:GM) to be the first to hit the mainstream, while Tesla currently only caters to the much smaller luxury market However, if Tesla continues to sell big, revenue there could justify the firm’s staggering share price.
In the end, this story has just begun. It will take close inspection of news releases over the coming months and years to really know which company will come out on top. But Nissan Motor Co., Ltd. (ADR) (OTCMKTS:NSANY)’s share price justifies a buy.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends General Motors and Tesla Motors (NASDAQ:TSLA) . The Motley Fool owns shares of Tesla Motors . Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Nissan’s Price Justifies a Buy originally appeared on Fool.com is written by Phillip Woolgar.
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