Last year, Auto sales were impacted by inflation and supply chain disruptions. However, the auto industry is expected to rebound this year thanks to falling inflation and easing supply chains.
Amid this backdrop, it could be wise to add fundamentally strong auto stocks Niu Technologies (NIU), Ford Motor Company (F), and Polaris Inc. (PII) to one’s watchlist.
Before diving deeper into the fundamentals of these stocks, let’s discuss why the auto industry is well-positioned for growth.
Driven by improved supply and robust demand, U.S. new vehicle sales rose 16.2% year-over-year and 2% sequentially to 1.34 million units in August. Globally, auto sales are expected to hit 86.8 million units in 2023, slightly above earlier estimates, with a projected 90.2 million units in 2024, driven by supply chain improvements.
The growing adoption of eco-friendly modes of transportation is driving the auto industry's growth. The shift to sustainable modes of transportation is leading to significant investments from automakers in research and development (R&D).
With government subsidies, stricter emission norms, a growing public charging network, and price cuts, the electric vehicle market is expected to grow strongly. The EV sector’s positive outlook will likely boost the auto industry’s long-term prospects. According to Goldman Sachs, EVs will make up about half of new car sales worldwide by 2035.
Considering these conducive trends, let’s take a look at the fundamentals of the three above-mentioned Auto & Vehicle Manufacturers stocks, beginning with the third choice.
Stock #3: Niu Technologies (NIU)
Headquartered in Beijing, the People's Republic of China, NIU designs, manufactures, and sells smart electric scooters in the People's Republic of China. The company offers RQi, NQi, MQi, SQi, UQi, and Gova series electric scooters and motorcycles; KQi series one kick-scooters; BQi series e-bikes; and Niu Aero Sports Bicycles.
In terms of forward EV/Sales, NIU’s 0.15x is 86.9% lower than the 1.13x industry average. Its 0.42x forward Price/Sales is 50.3% lower than the 0.84x industry average. Additionally, its 1.06x forward Price/Book is 54.6% lower than the 2.33x industry average.
For the fiscal second quarter ended June 30, 2023, NIU’s total revenues rose marginally year-over-year to RMB828.81 million ($113.45 million). Its gross profit rose 14.2% year-over-year to RMB191.48 million ($26.21 million). The company’s adjusted net income declined 53.9% year-over-year to RMB14.36 million ($1.97 million).
NIU’s EPS for fiscal 2023, is expected to increase significantly year-over-year to $0.22. Likewise, its revenue for the same fiscal is expected to increase 9.1% year-over-year to $502.75 million. Over the past month, the stock has declined 11.9% to close the last trading session at $2.71.
NIU’s POWR Ratings are consistent with this uncertain outlook. It has an overall rating of C, translating to Neutral in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #35 out of 55 stocks in the Auto & Vehicle Manufacturers industry. It has a C grade for Growth, Momentum, Sentiment, and Quality. Click here to see NIU's Value and Stability ratings.
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, and Ford Pro; Ford Next; and Ford Credit segments.
On April 11, 2023, F announced a C$1.8 billion investment in its Oakville Assembly Complex to transform it into the Oakville Electric Vehicle Complex, becoming the first full-line automaker to produce passenger EVs in Canada for the North American market. This investment will upgrade the facility for next-gen EV production, showcasing F's global commitment to expanding EV manufacturing.
In addition, F is creating EV manufacturing hubs in Tennessee and Michigan, upgrading its assembly campus in Cologne, Germany, and partnering on a major battery cell production facility in Turkey, among other projects.
On June 12, 2023, F launched the Cologne Electric Vehicle Center in Germany, a state-of-the-art facility for building electric passenger vehicles for the European market. This signifies a $2 billion investment, underscoring F's dedication to European manufacturing and carbon neutrality. The facility will annually manufacture over 250,000 EVs.
In terms of forward non-GAAP P/E, F’s 5.88x is 58.1% lower than the 14.04x industry average. Its 0.94x forward EV/Sales is 16.7% lower than the 1.13x industry average. However, its 0.28x forward Price/Sales is 66.5% lower than the 0.84x industry average.
F’s total revenues for the second quarter ended June 30, 2023, increased 11.9% year-over-year to $44.95 billion. Its adjusted net income increased 6.5% year-over-year to $2.93 billion. Its adjusted EBIT rose 1.7% year-over-year to $3.79 billion. The company’s non-GAAP EPS came in at $0.72, representing an increase of 5.9% year-over-year.
On the other hand, its operating income declined 14.2% year-over-year to $2.46 billion.
Street expects F’s EPS and revenue for the quarter ending September 30, 2023, to increase 49.5% and 25.5% year-over-year to $0.45 and $46.66 billion, respectively. The stock has gained 10.2% to close the last trading session at $12.20.
F’s bleak prospects are reflected in its POWR Ratings. It has an overall rating of C, which translates to a Neutral in our proprietary rating system.
It has a C grade for Momentum, Stability, Sentiment, and Quality. It is ranked #29 in the same industry. To see F’s ratings for Growth and Value, click here.
Stock #1: Polaris Inc. (PII)
PII designs, engineers, manufactures, and markets powersports vehicles worldwide. It operates through three segments: Off-Road, On-Road, and Marine. The company offers off-road vehicles (ORVs), including all-terrain vehicles and side-by-side vehicles; military and commercial ORVs; snowmobiles; motorcycles; moto-roadsters, quadricycles, and boats; and aftermarket parts and apparel.
On August 28, 2023, PII announced two new concept electric pontoons under its Bennington and Godfrey Pontoons brands, showcasing high-horsepower electric propulsion demonstrators at their annual dealer meetings in Syracuse, Ind. These vessels serve as testbeds for future electric propulsion watercraft development, offering benefits like lower maintenance and greater torque.
Ben Duke, president at PII Marine said, "Building off the introduction of last year's Mighty G, where customers who ended up selecting an electric vs. gas-powered motor option were more than double our expectations, we recognize the future potential of this technology and pontoons offerings that have been optimized for electric propulsion."
In terms of forward non-GAAP P/E, PII's 10.06x is 28.4% lower than the 14.04x industry average. Its 6.90x forward EV/EBITDA is 25.2% lower than the 9.23x industry average.
PII's sales for the second quarter ended June 30, 2023, increased 7.5% year-over-year to $2.22 billion. The company’s gross profit rose 6.5% year-over-year to $505 million. Also, its adjusted EBITDA rose 4.2% year-over-year to $265.50 million.
On the other hand, the company’s adjusted net income from continuing operations attributable to PII declined 5% year-over-year to $139.60 million. Additionally, its adjusted EPS from continuing operations attributable to PII remained flat year-over-year to come in at $2.42.
Analysts expect PII’s EPS for the quarter ending September 30, 2023, to decline 15.8% year-over-year to $2.74. Its revenue for the fiscal 2023, is expected to increase 4.1% year-over-year to $8.94 billion. PII surpassed the consensus EPS estimates in each of the trailing four quarters. Over the nine months, the stock has gained 2.4% to close the last trading session at $104.45.
PII’s mixed fundamentals are reflected in its POWR Ratings. It has an overall rating of C, which translates to a Neutral in our proprietary rating system.
It has a C grade for Growth, Momentum, Stability, and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #28. In total, we rate PII on eight different levels. Beyond what we stated above, we also have given PII grades for Value and Sentiment. Get all the PII ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
F shares were trading at $12.52 per share on Friday morning, up $0.32 (+2.62%). Year-to-date, F has gained 17.13%, versus a 14.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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