The automotive industry is booming due to rapid urbanization, swift adoption of electric vehicles (EVs), government support, and increasing disposable incomes. Further, the integration of technologies like Artificial Intelligence (AI), the Internet of Things (IoT), and big data into vehicles enhances safety and user experience, contributing to the industry’s expansion.
Given the industry’s tailwinds, investors could consider buying fundamentally sound auto stocks Wabash National Corporation (WNC), Li Auto Inc. (LI), and Mazda Motor Corporation (MZDAY) this month.
According to a joint report by industry consultants J.D. Power and GlobalData, U.S. new vehicle sales are projected to rise 12.1% in March, driven by solid demand and vehicle availability. Surging demand for high-end passenger vehicles, rapid urbanization, and increasing disposable income are key factors bolstering the automotive industry’s growth.
As per a Market Research Future report, the global automotive industry is expected to grow at a 6.9% CAGR, reaching $6.95 trillion by 2030.
Moreover, the growing popularity of fuel-efficient, high-performance, and low-emission vehicles, stringent government rules and regulations toward vehicle emission, and the reduction in the cost of EV batteries are driving the electric vehicle market’s expansion. The global electric vehicle market is projected to reach $823.75 billion by 2030, registering a CAGR of 18.2%.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best Auto & Vehicle Manufacturers industry stocks, beginning with the third choice.
Stock #3: Wabash National Corporation (WNC)
WNC designs, manufactures, and distributes connected solutions for the transportation, logistics, and distribution industries. The company operates through two segments: Transportation Solutions and Parts & Services.
On February 15, 2024, WNC announced that its Board of Directors authorized the repurchase of up to an additional $150 million of the company’s common stock. With this increase to the existing repurchase authorization, the company’s total outstanding repurchase authorization is nearly $180 million.
WNC’s trailing-12-month EBITDA margin of 14.20% is 4.1% higher than the industry average of 13.65%. Also, the stock’s trailing-12-month net income margin and EBIT margin of 9.12% and 12.42% are 56.4% and 23.8% higher than the industry averages of 5.83% and 10.03%, respectively.
For the fourth quarter ended December 31, 2023, WNC reported net sales of $596.10 million. Its gross profit rose 14.4% over the prior year’s quarter to $108.22 million. The company’s adjusted net income attributable to common shareholders came in at $50.38 million, or $1.07 per share, up 21.5% and 27.4% year-over-year, respectively.
For the fiscal year ending December 2024, the company issued guidance with sales in the range of $2.20 billion to $2.40 billion with a midpoint of $2.30 billion and earnings per share of $2 to $2.50 with a midpoint of $2.25.
Analysts expect WNC’s revenue for the fiscal year 2025 to increase 2.7% year-over-year to $2.32 billion. Street expects its EPS to grow 19.2% year-over-year to $2.62 for the same period. Moreover, the company surpassed consensus EPS estimates in each of the trailing four quarters, which is promising.
WNC’s stock has soared 25.9% over the past six months to close the last trading session at $25.82.
WNC’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.
The stock has an A grade for Value and a B for Quality. It is ranked #21 in the 51-stock Auto & Vehicle Manufacturers industry.
Beyond what is stated above, we’ve also rated WNC for Growth, Momentum, Sentiment, and Stability. Get all WNC ratings here.
Stock #2: Li Auto Inc. (LI)
Based in Beijing, China, LI is a leading player in China’s electric vehicle sector, producing premium smart MPVs and SUVs. The company provides a range of services, including sales, after-sales management, technology development, and corporate management through various distribution channels.
On April 18, 2024, LI launched Li L6, a five-seat premium family SUV. Li L6 will offer Pro and Max trims at retail prices of RMB249,800 and RMB279,800, respectively, and will commence deliveries in April 2024. The new product launches are expected to extend the company’s market reach and drive sales.
On April 1, 2024, LI reported a 39.2% year-over-year increase in vehicle deliveries for February 2024, reaching 28.984 units, with cumulative deliveries totaling 713,764 by the end of the month.
The company also planned to launch new models, including the Li MEGA and 2024 Li L series, aiming to rebound monthly deliveries to 50,000 vehicles in March while maintaining 475 retail stores and 355 servicing centers across China.
LI’s trailing-12-month net income margin of 9.45% is 106.5% higher than the industry average of negative 4.58%. Its trailing-12-month levered FCF margin of 32.14% is 482.3% higher than the 5.52% industry average. Also, the stock’s trailing-12-month ROCE of 22.29% is 100.6% higher than the 11.11% industry average.
During the fourth quarter ending December 31, 2023, LI reported total revenues of $5.88 billion, marking a 136.4% increase from the year-ago quarter. Its gross profit grew 174.4% year-over-year to$1.38 billion. Its non-GAAP net income came in at $646.30 million, up 374.2% from the prior year’s period.
Moreover, the company’s non-GAAP net earnings per ADS attributable to ordinary shareholders rose 354.8% year-over-year to $0.60. Its free cash flow was $2.06 billion, an increase of 349.4% from the same quarter of 2022.
Analysts expect LI’s revenue to increase 56.3% year-over-year to $4.23 billion, accompanied by a projected 7.9% year-over-year rise in EPS to $0.21 for the first quarter that ended March 2024. Moreover, the company has topped consensus revenue estimates in each of the trailing four quarters, which is impressive.
Shares of LI have gained 8.6% over the past year to close the last trading session at $24.91.
LI’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
LI has an A grade for Quality and a B for Growth. It is ranked #19 in the same industry.
In addition to the POWR Ratings highlighted above, one can access LIs ratings for Sentiment, Value, Stability, and Momentum here.
Stock #1: Mazda Motor Corporation (MZDAY)
Headquartered in Hiroshima, Japan, MZDAY manufactures and sells passenger cars and commercial vehicles in Japan, China, North America, Europe, and internationally.
On April 18, 2024, MZDAY unveiled the Mazda CX-80, the first-ever crossover SUV. In Europe, the pre-sales will commence in May, and the product will go on sale in fall 2024.
The Mazda CX-80, the fourth model in Mazda’s Large Product Group, is a mid-size crossover SUV that embodies the joy of driving sustained with Mazda's human-centric philosophy and excellent environmental and safety performance. Such innovative launches are expected to boost the company’s growth and profitability.
MZDAY’s trailing-12-month ROTC and ROTA of 13.59% and 5.82% are higher than the industry averages of 11.11% and 4.20%, respectively. Further, the stock’s 1.40x trailing-12-month asset turnover ratio is 40.1% higher than the 1x industry average.
For the first nine months that ended December 31, 2023, MZDAY’s net sales increased 32.3% year-over-year to ¥3.57 trillion ($23.07 billion). Its gross profit came in at ¥767.99 billion ($4.96 billion), up 31.1% year-over-year. Its operating income rose 82.9% over the prior-year period to ¥200.20 billion ($1.29 billion).
In addition, the company’s net income attributable to owners of the parent and net income per share stood at ¥165.49 billion ($1.07 billion) and ¥262.45, up 59.8% year-over-year, respectively.
For the fiscal year ending March 2024, the consensus revenue estimate of $31.50 billion indicates an improvement of 42.5% year-over-year. Street expects MZDAY’s revenue for the fiscal 2025 first quarter (ending June 2024) to increase 6.3% year-over-year to $8.09 billion.
Over the past year, the stock has gained 24.1% to close the last trading session at $5.41.
MZDAY’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.
MZDAY has an A grade for Value and a B for Stability, Growth, and Quality. It is ranked first in the same industry.
Click here to access the additional MZDAY ratings (Momentum and Sentiment).
What To Do Next?
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WNC shares were trading at $26.01 per share on Tuesday morning, up $0.19 (+0.74%). Year-to-date, WNC has gained 2.14%, versus a 6.11% 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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