The auto industry is fueled by technological advancement in the global auto parts market and rising demand for personal and commercial vehicles. Given the industry’s steady growth prospects, investors could consider quality auto stocks American Axle & Manufacturing Holdings, Inc. (AXL), Valeo SE (VLEEY), and Garrett Motion Inc. (GTX), which are currently trading under $15.
The increased usage of technological advancement in the global auto parts market is driving growth in the industry. Technological innovation in braking components, headlamps, and other parts is driving the global auto parts market on a constant basis.
The auto parts market is estimated to grow at a CAGR of 3.6% until 2027.
Additionally, according to ABI Research, global vehicle sales are expected to increase by 3.3% in 2024 and reach the previous high of more than 90 million units in 2025. In addition, the rise of Electric Vehicles (EVs) is one of the most significant trends in the automotive space.
Moreover, the automotive market is expected to keep growing in the coming years because of the rising demand for personal and commercial vehicles, the rise of new technologies like electric and self-driving cars, and the growing awareness of safety and environmental issues among consumers.
The global automotive market is expected to grow to $28.70 billion by 2030 at a CAGR of 4.5%.
With these favorable trends in mind, let's delve into the fundamentals of the three best Auto Parts stocks, beginning with the third choice.
Stock #3: American Axle & Manufacturing Holdings, Inc. (AXL)
AXL designs, engineers, and manufactures driveline and metal-forming technologies that supports electric, hybrid, and internal combustion vehicles. It operates through Driveline; and Metal Forming segments.
AXL’s trailing-12-month CAPEX/Sales of 3.25% is marginally higher than the industry average of 3.24%. Its trailing-12-month asset turnover ratio of 1.06x is 6.5% higher than the industry average of 1x.
AXL’s net sales increased 9.2% year-over-year to $1.57 billion in the fiscal second quarter that ended June 30, 2023. Gross profit increased 10.1% year-over-year to $178.20 million, and net income came in at $8 million. Also, its EPS came in at $0.07.
Street expects AXL’s revenue for the fiscal third quarter ending September 2023 to grow 3.2% year-over-year to $1.58 billion. Its EPS is expected to be $0.14 for the same quarter. Also, it has surpassed its EPS and revenue estimates in three of the trailing four quarters.
AXL’s shares have gained 3.1% over the past month to close the last trading session at $7.76.
AXL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Value. Within the same industry, it is ranked #29 out of 59 stocks in the A-rated Auto Parts industry.
Beyond what is stated above, we’ve also rated AXL for Momentum, Growth, Stability, Quality, and Sentiment. Get all AXL ratings here.
Stock #2: Valeo SE (VLEEY)
Headquartered in Paris, France, VLEEY designs, produces, and sells components, systems, and services for automakers in France, other European countries, Africa, North America, South America, and Asia. The company operates through four segments: Comfort & Driving Assistance Systems; Powertrain Systems; Thermal Systems; and Visibility Systems.
On August 18, 2023, VLEEY announced that it had signed an agreement with NPK Avtopribor for the sale of all of VLEEY's production assets of its Powertrain Systems business in Russia.
Completion of this transaction is subject to obtaining the necessary regulatory approvals. It will enable the 158 Russian employees in this business to keep their jobs. This sale will be carried out without any capital gain or loss. VLEEY will also have a buyback option for ten years, which can be activated from the sixth year.
With a four-year average dividend yield of 2.10%, VLEEY pays an annual dividend of $0.20, which translates to a dividend yield of 2.14% on the current price level.
VLEEY’s trailing-12-month CAPEX/Sales of 4.18% is 29.1% higher than the industry average of 3.24%. Its trailing-12-month asset turnover ratio of 1.07x is 7.6% higher than the industry average of 1x.
During the first half that ended June 30, 2023, VLEEY’s sales rose 19% year-over-year to €11.21 billion ($12.03 billion). The company’s EBITDA increased 17% year-over-year to €13.02 billion ($13.18 billion). Its operating margin grew 40.7% from the year-ago value to €363 million ($391.05 million).
Also, the company’s EPS came in at €0.5, compared to the negative $0.2 in the previous-year quarter.
Analysts expect VLEEY’s revenue for the fiscal third quarter ending September 2023 to grow 19% year-over-year to $6.24 billion.
Shares of VLEEY have gained 9.6% over the past nine months to close the last trading session at $9.58.
It’s no surprise that VLEEY has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
VLEEY has an A grade for Value and a B for Stability. It is ranked #15 in the same industry.
In addition to the POWR Ratings highlighted above, one can access VLEEY’s ratings for Momentum, Growth, Quality, and Sentiment here.
Stock #1: Garrett Motion Inc. (GTX)
GTX designs, manufactures, and sells turbochargers and electric-boosting technologies for global light and commercial vehicle OEMs. The company provides light-vehicle gasoline, light-vehicle diesel, commercial vehicle turbochargers, and automotive software solutions.
GTX’s trailing-12-month ROTC of 30.26% is 400.2% higher than the industry average of 6.05%, while its trailing-12-month ROTA of 12.76% is 227.9% higher than the industry average of 3.89%.
In the fiscal second quarter ended June 30, 2023, GTX’s net sales increased 17.7% year-over-year to $1.01 billion. The company’s adjusted EBITDA increased 23.2% year-over-year to $170 million. Also, its gross profit increased 19.5% year-over-year to $202 million.
Street expects GTX’s revenue to increase 11.7% year-over-year to $4.02 billion for the year ending December 2023. Its EPS is expected to grow at 32.3% year-over-year to $0.99 for the same year. Also, the company topped the consensus revenue estimates in three of the four trailing quarters.
Over the past year, the stock has gained 9.3% to close the last trading session at $7.75.
GTX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, Stability, and Quality. It is ranked #9 in the same industry.
Click here to access the additional GTX ratings (Momentum and Sentiment).
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VLEEY shares were trading at $9.52 per share on Wednesday morning, down $0.06 (-0.63%). Year-to-date, VLEEY has gained 9.76%, versus a 17.68% 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.
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