The auto industry is expected to grow this year due to rising demand for electric vehicles, and technological advancements that make them more affordable and accessible to a wider consumer base. Therefore, fundamentally sound auto stocks Stellantis N.V. (STLA), Genuine Parts Company (GPC) and Cars.com Inc. (CARS) could be wise portfolio additions.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the auto industry.
In November, the number of new vehicles sold in the U.S. was 1,242,376 units, up 8.8% from October 2022 and 2.6% from October 2023. This increase in the sales of new vehicles reflects a favorable trend in the automotive industry, reflecting increased customer confidence and demand. It also implies that the market is recovering from any potential setbacks or obstacles encountered in recent months.
According to Atlas Public Policy, electric vehicle sales in the United States are likely to reach a record 9% of all passenger vehicles in 2023. This will be an increase from 7.3% of new car sales in 2022. Government incentives and policies encouraging the use of electric vehicles have played an important part in boosting this growing trend.
This will be the first time that more than one million EVs are sold in the United States in a single calendar year, with sales likely to range between 1.3 million and 1.4 million cars.
The AI in automotive market is expected to grow at a 22.7% CAGR to $52.98 billion by 2028. Rising technological advancements and consumer preference for vehicles with advanced systems have been major drivers for AI in the automotive market.
Considering these conducive trends, let’s look at the fundamentals of the three auto stocks.
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, the Netherlands, STLA designs, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems worldwide. It offers its products under the Abarth, Alfa Romeo, Chrysler, DS, Dodge, Jeep, Fiat, Maserati, Ram, Opel, Lancia, Vauxhall, Peugeot, Comau, and Teksid brands.
STLA’s forward EV/EBITDA multiple of 1.33 is 86.9% lower than the industry average of 10.17. Its forward EV/EBIT multiple of 1.75% is 87.9% lower than the industry average of 14.52.
STLA’s trailing-12-month ROCE of 27.85% is 144.2% higher than the industry average of 11.40%, while its trailing-12-month ROTA of 9.95% is 149.1% higher than the industry average of 4%.
STLA’s net revenues for the six months ended June 30, 2023, increased 11.8% year-over-year to €98.37 billion ($105.52 billion). Its net profit increased 37.2% year-over-year to €10.92 billion ($11.71 billion). Its adjusted operating income rose 11% year-over-year to €14.13 billion ($15.16 billion). The company’s EPS came in at €3.45, representing an increase of 39.7% year-over-year.
Street expects STLA’s revenue to increase 9% year-over-year to $207.46 billion for the year ending December 2023. Its EPS is expected to grow 21.3% year-over-year to $6.70 for the same period. Shares of STLA have gained 69.3% over the past year to close the last trading session at $23.45.
STLA’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
STLA also has an A grade for Value and a B for Stability. It is ranked #11 out of 52 stocks in the Auto & Vehicle Manufacturers industry. Click here for the additional POWR Ratings for Growth, Sentiment, Momentum and Quality for STLA.
Genuine Parts Company (GPC)
GPC distributes and sells automotive replacement parts, and industrial parts and related materials. The company operates through two segments: Automotive Parts Group and Industrial Parts Group.
GPC’s forward non-GAAP P/E multiple of 14.93 is 8.3% lower than the industry average of 16.27. Its forward EV/Sales multiple of 0.99% is 21% lower than the industry average of 1.26.
GPC’s trailing-12-month gross profit margin of 77.22% is 58.7% higher than the industry average of 48.67%. Its trailing-12-month levered FCF margin of 14.60% is 73.6% higher than the industry average of 8.41%.
GPC’s net sales increased 2.6% year-over-year to $5.82 billion in the third quarter ended September 30, 2023. Its gross profit grew 6.5% from the year-ago value to $2.11 billion. Its adjusted net income rose 10.7% from the prior year’s quarter to $351.20 million, and its adjusted EPS came in at $2.49, an increase of 11.7% year-over-year.
The consensus revenue estimate of $23.19 billion for the year ending December 2023 represents a 4.9% increase year-over-year. Its EPS is expected to grow 11.2% year-over-year to $9.27 for the same period. It surpassed EPS estimates in all four trailing quarters. GPC’s shares have gained 3% over the past month to close the last trading session at $138.39.
GPC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #13 out of 61 stocks in the A-rated Auto Parts industry. It has a B grade for Sentiment and Quality. To see additional GPC’s ratings for Growth, Value, Stability and Momentum, click here.
Cars.com Inc. (CARS)
CARS operates as a digital marketplace and provides solutions for the automotive industry. Its platform connects car shoppers with sellers. The company offers services that connect sellers with buyers, provide financing tools, and empower shoppers with digital resources for car buying decisions.
CARS’ forward non-GAAP P/E multiple of 6.93 is 55.5% lower than the industry average of 15.59.
CARS’ trailing-12-month net income margin of 17.76% is 452.7% higher than the 3.21% industry average. Its trailing-12-month ROTA of 10.91% is 780.6% higher than the 1.24% industry average.
For the fiscal third quarter ended September 30, 2023, CARS’ total revenue increased 5.9% year-over-year to $174.33 million. Its operating income came in at $14.32 million.
The company’s net income and earnings per share stood at $4.49 million and $0.07, compared to a net loss and loss per share of $2.94 million and $0.04 in the year-ago quarter. In addition, its adjusted EBITDA came in at $49.49 million.
Street expects CARS’ revenue to increase 5.2% year-over-year to $687.95 million for the year ending December 2023. Its EPS is expected to grow 89.2% year-over-year to $2.80 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 51.1% over the past year to close the last trading session at $19.38.
It’s no surprise that CARS has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Value, Sentiment and Momentum. It is ranked #2 out of 20 stocks in the B-rated Auto Dealers & Rentals industry.
Beyond what is stated above, we’ve also rated CARS for Stability, Growth and Quality. Get all CARS ratings here.
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STLA shares were trading at $23.40 per share on Friday morning, down $0.05 (-0.21%). Year-to-date, STLA has gained 64.79%, versus a 26.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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