The auto industry is evolving as it adapts to growing market demands and challenges associated with electric, autonomous, and hybrid vehicles. Despite the near-term challenges, vehicle sales might witness stable growth this year.
Therefore, investing in auto stocks PT Astra International Tbk (PTAIY) and Penske Automotive Group, Inc. (PAG), which have demonstrated high performance, could be wise.
Sales of new vehicles in the United States increased by 18.4% in March 2023 compared to February 2023 and by 8.7% compared to March 2022, when supply chains hampered output.
AutoPacific recently released its projection for light vehicle sales in the United States, forecasting a year-end total of 14.8 million units sold in 2023. The 1-million-unit improvement from a dismal 13.8 million units sold in 2022 can be due to several factors, including sustained supply chain recovery and electric vehicle (EV) growth.
The car rental market (hiring a passenger vehicle for self-drive, including cars and small vans, by both business and leisure travelers for a short period of time; excluding leasing and long-term rentals) has grown rapidly in recent years and is likely to expand further. The car rental sector is expected to grow at a 10.6% CAGR until 2026.
In addition, the global automotive market is expected to grow at a 4.5% CAGR until 2030.
Let’s delve deeper into the fundamentals of the stocks mentioned above.
PT Astra International Tbk (PTAIY)
Headquartered in Jakarta, Indonesia, PTAIY together with its subsidiaries, operates in the automotive, financial services, heavy equipment, mining, construction, energy, Agri, infrastructure and logistics, information technology, and property businesses in Indonesia.
PTAIY’s forward EV/EBITDA of 6.34x is 31.6% lower than the industry average of 9.28x. Its forward EV/EBIT multiple of 8.32 is 35.4% lower than the industry average of 12.87.
PTAIY’s trailing-12-month net income margin of 9.60% is 110.7% higher than the 4.56% industry average. Its trailing-12-month EBIT margin of 14.53% is 87% higher than the 7.77% industry average.
PTAIY’s net revenue increased 29.1% year-over-year to Rp301.38 trillion ($20.16 billion) for the year ended December 31, 2022. Its gross profit grew 37.3% from its year-ago value to Rp70.09 trillion ($4.96 billion), while its profit came in at Rp40.42 trillion ($2.70 billion), up 58% year-over-year. Also, its EPS came in at Rp715, up 43.3% year-over-year.
The consensus revenue estimate of $20.02 billion for the year ending 2024 represents a 2.6% increase year-over-year. The stock has gained 17.2% over the past three months to close its last trading session at $8.06.
PTAIY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Stability and a B for Value and Sentiment. Within the B-rated Auto Dealers & Rentals industry, PTAIY is ranked first among 21 stocks. To see additional POWR Ratings for Growth and Sentiment for PTAIY, click here.
Penske Automotive Group, Inc. (PAG)
PAG is a diversified transportation services company, operates automotive and commercial truck dealerships in the United States and internationally. The company operates through four segments: Retail Automotive; Retail Commercial Truck, Other; and Non-Automotive Investments.
PAG’s forward EV/Sales of 0.59x is 44.7% lower than the industry average of 1.07x. Its forward Price/Sales multiple of 0.34 is 58.7% lower than the industry average of 0.83.
PAG’s trailing-12-month ROCE of 33.58% is 184.8% higher than the 11.79% industry average. Its trailing-12-month ROTA of 9.78% is 144.4% higher than the 4% industry average.
PAG’s revenue increased 11.4% year-over-year to $7.01 billion in the fourth quarter that ended December 31, 2022. Its gross profit increased marginally year-over-year to $1.18 billion. Moreover, its EPS increased 5.5% year-over-year to $4.21.
PAG’s revenue is expected to increase by 2.9% year-over-year to $28.48 billion in 2024. Its EPS is expected to grow marginally per annum for the next five years. PAG’s shares have gained 48.8% over the past year to close the last trading session at $137.71.
PAG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade in Value and Stability. Within the same industry, it is ranked #2. Click here to access additional POWR Ratings for Growth, Quality, Sentiment, and Momentum for PAG.
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PTAIY shares were unchanged in premarket trading Thursday. Year-to-date, PTAIY has gained 13.68%, versus a 6.80% 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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