The past year has been challenging for the automotive industry as it grappled with supply chain issues, high raw material prices, and rising interest rates. Total new vehicle sales in the United States declined 8% year-over-year in 2022, registering its worst performance in over a decade.
Electric vehicle (EV) manufacturer Mullen Automotive, Inc.’s (MULN) loss from operations for the third quarter that ended September 30, 2022, widened 332.9% year-over-year to $96.99 million. Net loss attributable to MULN shareholders widened significantly year-over-year to $739.53 million.
MULN’s trailing-12-month P/B of 4.99x is 110% higher than the 2.38x industry average. Moreover, its trailing-12-month Return on Total Assets is negative, compared to the 4.55% industry average.
On the other hand, auto sales are expected to rise, driven by the transition to electric vehicles and supportive government initiatives to boost EV sales. The sale of EVs rose 65% year-over-year, increasing almost two-thirds compared to 2021. In 2022, EVs accounted for 5.8% of all new car sales in the United States, up from 3.1% in 2021.
According to S&P Global Mobility, U.S. new vehicle sales in 2023 are expected to be 14.80 million, while Cox Automotive’s preliminary forecast is 14.10 million, coming in higher than the 13.90 million units sold last year.
Amid this backdrop, fundamentally strong auto stocks Volkswagen AG (VWAGY), Honda Motor Co., Ltd. (HMC), and Mazda Motor Corporation (MZDAY) could be better buys over MULN.
Volkswagen AG (VWAGY)
Headquartered in Wolfsburg, Germany, VWAGY operates through four segments: Commercial Vehicles; Power Engineering; Financial Services; Passenger Cars and Light Commercial Vehicles. The company also offers motorcycles. It provides its products under brands such as Volkswagen Passenger Cars, Audi, Škoda, Bentley, and Porsche.
In terms of forward EV/Sales, VWAGY’s 0.90x is 27.7% lower than the 1.25x industry average. Likewise, its 11.13x forward EV/EBIT is 20.4% lower than the 13.98x industry average.
On October 28, 2022, VWAGY announced that it would invest $763.50 million between 2022 and 2025 at its complex in Puebla, Mexico, to build a new paint plant and start production of a new gasoline-powered car. The plant is expected to open this year.
For the fiscal third quarter (ended September 30, 2022), VWAGY’s sales revenue increased 24.2% year-over-year to €70.71 billion ($77.10 billion). The company’s gross result increased 42.1% from the prior-year quarter to €12.68 billion ($13.83 billion). Additionally, its operating result increased 64.5% year-over-year to €4.27 billion ($4.65 billion).
VWAGY’s revenue for the quarter that ended December 31, 2022, is expected to increase 16.1% year-over-year to $80.84 billion. Its EPS for the fiscal year 2022 is expected to increase 100.4% year-over-year to $6.51. Over the past three months, the stock has gained 17.3% to close the last trading session at $17.88.
VWAGY’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Auto & Vehicle Manufacturers industry, it is ranked first out of 62 stocks. The company has an A grade for Value and a B for Growth, Stability, and Quality. Click here to see the additional POWR Ratings of VWAGY for Momentum and Sentiment.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life Creation and Other Businesses.
In terms of forward EV/EBITDA, HMC’s 7.16x is 30% lower than the 10.22x industry average. Likewise, its 11.11x forward EV/EBIT is 20.5% lower than the 13.98x industry average.
On January 13, 2023, LG Energy Solution and HMC announced a joint venture to produce lithium-ion batteries for electric vehicles produced by HMC. The joint venture is a major step toward an electrified future, and the two companies have committed to creating 2,200 jobs to establish the new production facility.
HMC’s sales revenue for the second quarter that ended September 30, 2022, increased 25% year-over-year to ¥4.26 trillion ($32.86 billion). The company’s operating profit increased 16.2% year-over-year to ¥231.24 billion ($1.78 billion).
Its profit for the period attributable to owners of the parent increased 13.6% year-over-year to ¥189.30 billion ($1.46 billion). Additionally, its EPS attributable to owners of the parent increased 14.8% from the prior-year period to ¥110.85.
Analysts expect HMC’s revenue for the quarter that ended December 31, 2022, to increase 6.7% year-over-year to $34.07 billion. Its EPS for the fiscal year 2024 is expected to increase 21.9% year-over-year to $2.87. The stock has gained 10.7% over the past month to close the last trading session at $25.31.
It is no surprise that HMC has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It is ranked #8 in the same industry. In addition, it has an A grade for Value and a B for Stability and Quality.
To see HMC’s ratings for Growth, Momentum, and Sentiment, click here.
Mazda Motor Corporation (MZDAY)
Headquartered in Hiroshima, Japan, MZDAY manufactures and sells passenger cars and commercial vehicles worldwide. Its principal products include four-wheeled vehicles, gasoline reciprocating engines, diesel engines, and automatic and manual transmissions for vehicles.
In terms of forward Price/Sales, MZDAY’s 0.17x is 82.3% lower than the 0.97x industry average. Likewise, its 4.36x forward EV/EBIT is 68.8% lower than the 13.98x industry average.
For the fiscal second quarter that ended September 30, 2022, MZDAY’s net sales increased 48.1% year-over-year to ¥1.03 trillion ($7.94 billion). The company’s gross profit increased 59% year-over-year to ¥224.02 billion ($1.73 billion).
Its operating income increased 448.4% year-over-year to ¥74.77 billion ($576.68 million). In addition, its net income attributable to owners of the parent increased 467.9% from the prior-year quarter to ¥70.86 billion ($546.52 million).
Analysts expect MZDAY’s revenue for the quarter that ended December 31, 2022, to increase 45.3% year-over-year to $8.35 billion. Over the past three months, the stock has gained 23.9% to close the last trading session at $4.10.
MZDAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked #5 in the same industry. It has an A grade for Growth and Value and a B for Quality.
We have also given MZDAY grades for Momentum, Stability, and Sentiment. Get all MZDAY ratings here.
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VWAGY shares were trading at $18.39 per share on Thursday afternoon, up $0.51 (+2.85%). Year-to-date, VWAGY has gained 17.55%, versus a 8.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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