Since last year, the auto industry has faced the headwinds of high inflation, supply chain disruptions, shortage of raw materials, and high borrowing rates. However, auto sales are expected to return to pre-pandemic levels with a growth of 9%. The auto parts industry is closely linked to the automobile industry as it provides crucial parts for manufacturing new vehicles.
However, its prospects do not depend entirely on new vehicle sales. As the demand for auto parts is expected to remain steady, it could be wise to buy auto parts stocks Valeo SE (VLEEY), Gates Industrial Corporation plc (GTES), Garrett Motion Inc. (GTX), and Superior Industries International, Inc. (SUP).
These stocks are A (Strong Buy) rated in our POWR Ratings system and are currently trading under $15.
Before discussing these stocks, let’s discuss why the auto parts industry is expected to do well.
With evolving automotive technology and consumer preferences, the hybrid and electric vehicles market is growing, fuelling the U.S. aftermarket automotive parts and components market growth. The global automotive market is expected to reach $28.70 billion by 2030 at a CAGR of 4.5%.
Moreover, the auto parts industry is expected to benefit significantly from the aging vehicle plying in the United States. The average age of passenger cars and light trucks in the U.S. is over 12 years. The auto parts manufacturing market is expected to grow at a CAGR of 3.5% until 2030.
Given these factors, fundamentally strong auto parts stocks VLEEY, GTES, GTX, and SUP could be worth owning.
Valeo SE (VLEEY)
Headquartered in Paris, France, VLEEY designs, produces, and sells components, systems, and services for automakers worldwide. The company operates through four segments: Comfort & Driving Assistance Systems, Powertrain Systems, Thermal Systems, and Visibility Systems.
On December 20, 2022, VLEEY and Ningbo Swell Industry Co., Ltd signed a strategic alliance agreement.
President of VLEEY’s Visibility Systems Business Group, said, Maurizio Martinelli, “This move completes Valeo’s strategy to capture worldwide business opportunities represented by the new front central area integrating additional lighting. I am convinced that the teamwork and complementarity of Valeo Visibility Systems Business Group and Ningbo Swell Industry will improve customer satisfaction and bring new business opportunities to both parties.”
In terms of forward EV/Sales, VLEEY’s 0.42x is 61.3% lower than the 1.07x industry average. Its 3.47x forward EV/EBITDA is 62.6% lower than the 9.28x industry average. Likewise, its 0.20x forward Price/Sales is 76.2% lower than the 0.83x industry average.
VLEEY’s sales for the fiscal year ended December 31, 2022, increased 16.1% year-over-year, €20.04 billion ($21.91 billion). Its net income attributable to owners of the company increased 31.4% year-over-year to €230 million ($251.48 million). Moreover, its EPS came in at €0.94, representing a 30.6% increase from the prior-year quarter.
VLEEY’s EPS for fiscal 2023 is expected to increase 88.3% year-over-year to $0.95. Its revenue for the quarter ended March 31, 2023, is expected to increase 15.2% year-over-year to $5.82 billion. Over the past six months, the stock has gained 27.9% to close the last trading session at $9.86.
VLEEY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #8 out of 60 stocks in the A-rated Auto Parts industry. In addition, it has an A grade for Growth and a B for Value, Momentum, and Stability. We have also given VLEEY grades for Sentiment and Quality. Get all the VLEEY ratings here.
Gates Industrial Corporation plc (GTES)
GTES manufactures and sells engineered power transmission and fluid power solutions worldwide. It operates in two segments, Power Transmission, and Fluid Power.
In terms of forward non-GAAP P/E, GTES’ 11.01x is 31.4% lower than the 16.05x industry average. Its 8.40x forward EV/EBITDA is 17.8% lower than the 10.22x industry average. Likewise, its 1.11x forward Price/Book is 53.1% lower than the 2.37x industry average.
For the fiscal fourth quarter that ended December 31, 2022, GTES’ net sales increased 9.5% year-over-year to $893.30 million. The company’s net income attributable to shareholders increased 35.4% year-over-year to $84.90 million.
Its adjusted EBITDA increased 18.9% year-over-year to $166 million, while its EPS came in at $0.30, representing a 42.9% increase from the prior-year quarter.
GHLD’s EPS and revenue for the quarter ended March 31, 2023, are expected to increase 0.8% and 1.2% year-over-year to $0.26 and $904.41 million, respectively. It has an impressive earnings surprise history, surpassing its consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 25.4% to close the last trading session at $13.
GTES’ POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It is ranked first in the same industry. The stock has a B grade for Growth, Value, Stability, Sentiment, and Quality. To see GTES’ rating for Momentum, click here.
Garrett Motion Inc. (GTX)
Headquartered in Rolle, Switzerland, GTX designs, manufactures, and sells turbochargers and electric-boosting technologies for light and commercial vehicle original equipment manufacturers worldwide. The company offers light vehicle gasoline and diesel, commercial vehicle turbochargers, and electrified vehicles and provides automotive software solutions.
In terms of forward EV/Sales, GTX’s 0.39x is 63.8% lower than the 1.07x industry average. Its 2.95x forward EV/EBIT is 77.1% lower than the 12.87x industry average. Likewise, its 0.14x forward Price/Sales is 83.3% lower than the 0.83x industry average.
GTX’s net sales for the fourth quarter, that ended December 31, 2022, increased 4.2% year-year-over-year to $898 million. Its gross profit increased 3.9% year-over-year to $161 million. Additionally, its adjusted EBITDA increased 8.5% year-over-year to $140 million.
GTX’s EPS and revenue for the quarter ended March 31, 2023, are expected to increase 36.7% and 2.3% year-over-year to $0.21 and $922 million, respectively. Over the past six months, the stock has gained 33.3% to close the last trading session at $8.16.
GTX’s POWR Ratings reflect its positive outlook. It has an overall rating of A, which equates to a Strong Buy.
It is ranked #4 in the same industry. In addition, it has an A grade for Value and a B for Growth, Momentum, and Quality. Click here to see the other ratings of GTX for Stability and Sentiment.
Superior Industries International, Inc. (SUP)
SUP designs, manufactures and sells aluminum wheels to the original equipment manufacturers and aftermarket distributors in North America and Europe. It offers its products under the ATS, RIAL, ALUTEC, and ANZIO brand names.
In terms of forward non-GAAP P/E, SUP’s 5.92x is 56.9% lower than the 13.74x industry average. Its 4.01x forward EV/EBITDA is 56.8% lower than the 9.28x industry average. Likewise, its 7.71x forward EV/EBIT is 40.1% lower than the 12.87x industry average.
For the fiscal fourth quarter that ended December 31, 2022, SUP’s net sales increased 9.2% year-over-year to $402.10 million. The company’s net income came in at $16.50 million, compared to a net loss of $3.90 million in the year-ago period.
Its adjusted EBITDA increased 53.7% year-over-year to $57.50 million. Additionally, its EPS came in at $0.25, compared to the loss per share of $0.48 in the prior-year quarter.
SUP’s revenue for the quarter ended March 31, 2023, is expected to increase 3.6% year-over-year to $414.75 million. Its EPS for the quarter ending June 30, 2023, is expected to increase 71.4% year-over-year to $0.12. Over the past six months, the stock has gained 50.2% to close the last trading session at $5.03.
It is no surprise that SUP has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #11 in the Auto Parts industry. It has an A grade for Growth and a B for Value and Sentiment.
In total, we rate SUP on eight different levels. Beyond what we stated above, we have also given SUP grades for Momentum, Stability, and Quality. Click here to access the additional ratings of SUP.
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VLEEY shares were trading at $9.86 per share on Thursday morning, down $0.39 (-3.80%). Year-to-date, VLEEY has gained 11.79%, versus a 6.58% 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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