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Automotive industry share values range from low to outrageous

Ron Walter looks at the automotive industry
BizWorld_withRonWalter
Bizworld by Ron Walter

The global automotive industry comprises a vast complex with significant influence on various economies.

The old saying: what’s for good for GM is good for America, perhaps best describes the industry’s influence.

The top 10 automotive companies by 2019 revenue, according to statista.com, generated almost $1.5 trillion sales in U.S. dollars.  

That amounts to 1.5 times the Canadian GDP, to place it in perspective. 

The leading auto makers by revenue are surprising with Toyota’s $280.5 billion taking top spot.

Germany’s Vokswagen comes second, some $5 billion behind, while Germany’s Daimler placed third at $189.2 billion revenues.

Ford was fourth with $149.2 billion sales. Next came Honda, $214.2 billion, followed by GM at $137.6 billion.

An industry once dominated by American manufacturers has changed as better built foreign models gained traction.

GM was followed by China’s SAIC at $121.1 billion and Italy’s Fiat Chrysler also at $121.2 billion.

Number 10 on the list is Germany’s BMW at $116.6 billion.

Revenues fail to match value.

Electric vehicles maker Tesla is valued at $751 billion, yet has only $24 billion sales. Obviously the hype over Elon Musk’s invention and enthusiasm on the future of electric vehicles has driven Tesla’s price into thin oxygen territory.

Comparing the value of a company to the revenues is one way of selecting candidates to explore for investment.

A mature, slow growth company should be valued at one to two times revenues while fast growers’ values range between three and five times.

Small fast growing companies’ value can range to 10 times revenues. Anything outside these multiples signals the market over-valuation of the stock, and requires a close eye on the stock.

Tesla, by contrast, is valued at a whopping 31 times revenues — almost 2.7 times revenue leading Toyota.

By this measure, almost half of the 10 biggest global vehicle makers’ values range between 2.1 times and 2.3 times revenues.

Toyota, is an exception, at 1.3 times revenues.

China’s SAIC Motors is valued lowest at .34 times $91.5 billion sales.

VW, Ford and Fiat Chrysler are valued the highest in the top 10. Ford sells at 3.85 times revenues; Fiat is 3.63 times and VW is 3.1 times.

Honda sells at 2.8 times.

Once a potential candidate is chosen, the homework starts. Why is the company undervalued? Does it have the technology to compete in an industry where the petroleum fired engine is losing power to the electric vehicle?

Does the company have the financial clout to finance a wholesale change in technology and demand?

CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.

Ron Walter can be reached at ronjoy@sasktel.net

The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.  

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