The rising adoption of electric vehicles is driving the auto market’s growth. Therefore, relatively undervalued auto stocks Niu Technologies (NIU), Ford Motor Company (F), and General Motors Company (GM) might be worth adding to your September watchlist.
The automotive industry’s growth is driven by a combination of global demand for vehicles, the adoption of advanced technologies, and increasing demand for electric and hybrid vehicles with an increasing focus on sustainability and energy efficiency.
The global market size for automotive manufacturing equipment is expected to reach $11.4 billion by 2028, growing at a CAGR of 11.1%.
Moreover, the increasing adoption of electric vehicles and spiking demand for advanced safety, connectivity, convenience, and driver assist features are driving the industry’s growth in the United States.
In addition, governments worldwide are putting stricter rules and regulations about emissions, fuel efficiency, and safety. This is driving innovation and leading to the development of new and more advanced automotive technologies.
The global automotive market is expected to reach $28.70 billion by 2030, growing at a CAGR of 4.5%.
With these favorable trends in mind, let’s delve into the fundamentals of the three undervalued Auto & Vehicle Manufacturers stocks, beginning with the third choice.
Stock #1: Niu Technologies (NIU)
Headquartered in Beijing, NIU designs, manufactures, and sells smart electric scooters in the People’s Republic of China.
NIU’s forward EV/Sales of 0.20x is 82.8% lower than the 1.17x industry average. Its forward P/S of 0.47x is 45.7% lower than the 0.86x industry average.
NIU’s revenues gained marginally to $828.81 million ($114.30 million) in the fiscal second quarter that ended June 30, 2023. Its gross profit increased 14.2% year-over-year to RMB191.48 million ($26.41 million). Also, adjusted net income came in at RMB14.36 thousand ($1.98 thousand).
Street expects NIU’s revenue to increase 10.4% year-over-year to $508.76 million for the fiscal year ending December 2023. Its EPS is expected to increase significantly from the previous year to $0.22 for the current year.
NIU gained 6.5% intraday to close its last trading session at $3.27.
NIU’s POWR Ratings reflect its robust outlook. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NIU has a B grade for Value. It is ranked #32 out of 58 stocks in the Auto & Vehicle Manufacturers industry.
For additional NIU’s Growth, Momentum, Quality, Stability, and Sentiment ratings, click here.
Stock #2: Ford Motor Company (F)
F develops, delivers, and services a range of Ford trucks, commercial cars and vans, sport utility vehicles, and Lincoln luxury vehicles worldwide. It operates through Ford Blue; Ford Model e; Ford Pro; Ford Next; and Ford Credit segments.
On August 28, 2023, F announced a pilot program with Duke Energy Corporation (DUK) to provide electric vehicle (EV) customers in their service area with a chance to save money, increase the use of renewable energy, and support electric grid resiliency while charging at home.
The EV Complete Home Charging Plan pilot aims to bring more certainty to the cost of EV home charging by providing a fixed monthly rate for electricity used in exchange for allowing Ford and Duke Energy to manage charging times to best support the electric grid.
On July 13, 2023, F announced a quarterly dividend of $0.15, payable on September 1, 2023. F pays $0.60 annually as dividends. This translates to a yield of 5.04% at the current price, compared to the four-year average dividend yield of 4.35%.
F’s forward EV/sales of 0.98x is 16.1% lower than the 1.17x industry average. Its forward P/S of 0.29x is 66.5% lower than the 0.86% industry average.
F’s revenues increased 11.9% year-over-year to $45 billion in the fiscal second quarter that ended June 30, 2023. Its adjusted net income increased 6.5% year-over-year to $2.93 billion. Its adjusted EPS increased 5.9% year-over-year to $0.72.
Analysts expect F’s revenue to increase 10.3% year-over-year to $41.01 billion for the fiscal third quarter ending September 2023. Its EPS is expected to increase 50.3% year-over-year to $0.45 for the same quarter. Also, it has surpassed revenue estimates in three of the trailing four quarters, which is impressive.
F’s shares have gained 8.9% year-to-date to close the last trading session at $12.05.
F’s promising outlook is reflected in its POWR Ratings. The stock has a B grade for Growth and Value. It is ranked #28 in the same industry.
To see additional POWR Ratings for Momentum, Quality, Sentiment, and Stability, click here.
Stock #3: General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and provides software-enabled services and subscriptions worldwide. The company operates through GM North America, GM International, Cruise, and GM Financial segments.
On August 8, 2023, GM announced that it would expand vehicle-to-home (V2H) bidirectional charging technology across its retail portfolio of Ultium-based electric vehicles by model year 2026.
The first vehicles to receive the technology include the previously announced 2024 Chevrolet Silverado EV RST, followed by the 2024 GMC Sierra EV Denali Edition 1, 2024 Chevrolet Blazer EV, 2024 Chevrolet Equinox EV, 2024 Cadillac LYRIQ and the upcoming Cadillac ESCALADE IQ.
On June 30, 2023, GM announced the acquisition of Israel-based battery software startup ALGOLiON Ltd. The move aims to bolster the company’s leadership in battery development through strategic investments. By integrating ALGOLiON’s software with its internal capabilities, GM plans to expedite the development of a cost-effective early hazard detection system, benefiting millions of customers globally.
In terms of forward non-GAAP P/E, GM’s 4.28x is 71.2% lower than the 14.87x industry average. Its 6.27x forward EV/EBITDA is 34.8% lower than the 9.62x industry average.
GM’s total revenues for the second quarter ended June 30, 2023, increased 25.1% year-over-year to $44.75 billion. Its net income attributable to stockholders rose 51.7% year-over-year to $2.57 billion. The company’s adjusted EBIT rose 38% year-over-year to $3.23 billion. Also, its adjusted EPS came in at $1.91, representing a 67.5% increase year-over-year.
For the third quarter ending September 30, 2023, GM’s revenue is expected to increase 4.4% year-over-year to $43.75 billion. Its EPS for the same quarter is expected to be $1.90. It surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained marginally over the past three months to close the last trading session at $33.46.
GM’s POWR Ratings are consistent with its positive outlook. GM has a B grade for Value. It is ranked #27 in the Auto & Vehicle Manufacturers industry.
Beyond what is stated above, we’ve also rated GM for Quality, Stability, Momentum, Sentiment, and Growth. Get all GM ratings here.
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F shares were trading at $12.10 per share on Wednesday morning, up $0.05 (+0.41%). Year-to-date, F has gained 13.20%, versus a 18.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor’s degree in finance and marketing and is pursuing the CFA program.
Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More…
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