In this piece, I have evaluated leading auto stocks, China-based NIO Inc. (NIO) and Blue Bird Corporation (BLBD), to determine the better investment. Based on the fundamental comparison of these stocks, I believe BLBD is the better buy for the reasons explained throughout this article.
Increasing urbanization, improved economic conditions, and better infrastructure are leading to higher demand for both passenger and commercial vehicles worldwide.
The global automotive market is expected to reach $28.70 billion by 2030, growing at a CAGR of 4.5%.
In addition, the adoption of advanced technologies, such as electric vehicles (EVs) and autonomous driving, is fueling further growth in the auto industry. EVs are gaining popularity due to environmental concerns and government incentives, while autonomous vehicles promise safer roads and reduced congestion.
As per Statista, the Electric Vehicles market is projected to reach $70.10 billion this year. This robust expansion is expected to continue, with a CAGR of 18.2%, resulting in a market volume of $161.60 billion by 2028. Also, EV’s unit sales are expected to reach 2.46 million vehicles in 2028.
BLBD is a clear winner in terms of price performance, with 83.6% returns over the past year compared to NIO’s 42.5% decline. BLBD has gained 98.5% year-to-date, while NIO returned 10.9%. Also, BLBD’s 78.7% gains over the past nine months are higher than NIO’s fall of 10.6%.
Here are the reasons why we think BLBD could perform better in the near term:
Latest Developments
On August 9, 2023, it was reported that NIO was gearing up for the launch of its debut smartphone, model number N2301. The company secured Chinese internet access rights until July 2025, runs on Android, offers 5G, dual-SIM, wireless charging, and car key functions, set for Q3 delivery.
NIO's smartphones will match their vehicle designs, aiming to elevate connected experiences in electric mobility.
On the other hand, on August 15, BLBD announced that it was supplying 20 electric school buses to Miami-Dade County Public Schools in Florida, marking the district's first zero-emission vehicles in their all-Blue Bird fleet of school buses.
This move aims to support the district's transition to clean student transportation, with M-DCPS currently operating a fleet of nearly 1,000 BLBD buses transporting 40,000 students daily.
Moreover, on June 5, BLBD announced that affiliates of Coliseum Capital Management LLC and American Securities LLC plan to offer 5,000,000 shares of BLBD's common stock in a secondary offering. The selling stockholders may grant underwriters an option to purchase an additional 750,000 shares.
Recent Financial Results
During the fiscal second quarter that ended June 30, 2023, NIO’s total revenue decreased 14.8% year-over-year to RMB8.77 billion ($1.20 billion). Its gross profit declined 93.5% from the year-ago quarter to RMB87 million ($11.94 million).
Additionally, its adjusted net loss increased by 140.2% from the previous year’s quarter to RMB5.45 billion ($748.09 million), and loss from operations rose 113.5% year-over-year to RMB6.07 billion ($833.20 million).
In contrast, for the fiscal third quarter that ended July 1, 2023, BLBD’s net sales increased 42.8% year-over-year to $294.28 million. Its adjusted EBITDA grew 218.6% from the year-ago value to $28.02 million.
Moreover, the company’s adjusted net income and adjusted EPS came in at $14.49 million and $0.44, compared to an adjusted loss and adjusted loss per share of $2.87 million and $0.09 in the year-ago quarter.
Past And Expected Financial Performance
Over the past three years, NIO’s revenue rose at a CAGR of 70.6%. Analysts expect NIO’s EPS to amount to negative $0.40 in the current quarter, negative $0.36 in the next quarter, and negative $1.50 in the current year. The company’s revenue is expected to rise 47.2% in the current quarter, 28.2% in the next quarter, and 19.6% in the current year.
On the other hand, BLBD’s revenue grew at a CAGR of 4.9% over the past three years. Analysts expect BLBD’s EPS to amount to $0.48 in the current quarter, $0.11 in the next quarter, and $0.87 in the current year. Analysts expect the company’s revenue to rise 12.6% in the current quarter, 17.7% in the next quarter, and 39.9% in the current year.
Profitability
BLBD is more profitable, with a trailing-12-month gross profit margin of 7.77% compared to NIO’s 5.46%. Also, BLBD’s trailing-12-month EBITDA margin and levered FCF margin of 1.34% and 10.93% are higher than NIO’s negative 37.77% and negative 1.67%, respectively.
Valuation
In terms of forward EV/Sales, NIO is currently trading at 2.38x, higher than BLBD, which is trading at 0.72x. Also, NIO’s forward P/S multiple of 2.30 is higher than BLBD’s 0.64.
Thus, BLBD is more affordable.
POWR Ratings
NIO has an overall rating of F, which equates to a Strong Sell in our proprietary POWR Ratings system. Conversely, BLBD has an overall rating of A, translating to a Strong Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NIO has a grade of D for Sentiment, which is justified by its pessimistic EPS estimates. BLBD, on the other hand, has a grade of B for Sentiment, in sync with favorable analysts’ expectations.
Moreover, NIO has a grade of D for Quality. Its trailing-12-month asset turnover ratio of 0.54x is 46.4% lower than the industry average of 1.00x. Its negative 1.67% trailing-12-month levered FCF margin compares to the 5.08% industry average.
However, BLBD has a B grade for Quality. Its trailing-12-month asset turnover ratio of 2.55x is 215.2% higher than the industry average of 0.81x. Its 10.93% trailing-12-month levered FCF margin is higher than the 5.41% industry average.
Of the 56 stocks in the Auto & Vehicle Manufacturers industry, NIO is ranked #48, while BLBD is ranked #19.
Beyond what we’ve stated above, we have also rated both stocks for Momentum, Value, Growth, and Stability. Click here to view NIO ratings. Get all BLBD ratings here.
The Winner
The automotive market is experiencing growth due to a surge in the demand for personal and passenger vehicles, the ongoing process of urbanization, and increased investments in infrastructure within the economy.
Leading auto companies NIO and BLBD are expected to benefit significantly from the industry’s bright growth prospects.
However, NIO’s poor financials, low profitability, and bleak growth prospects make its competitor BLBD the better buy now.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturers industry 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:
BLBD shares were trading at $21.56 per share on Wednesday morning, up $0.30 (+1.41%). Year-to-date, BLBD has gained 101.31%, versus a 17.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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