Holding one of the strongest cash positions in the industry while trading at 6.5 times forward earnings (Morningstar) and 0.1 times its sales and a PEG ratio of 0.2, I would recommend buying and holding this stock, in spite of its high leverage levels. Analysts expect the firm to deliver an average annual EPS growth rate of about 33% over the next five years (Morningstar); don’t miss out!
In India: Tata Motors
Tata Motors Limited (ADR) (NYSE:TTM) is the leading manufacturer of commercial vehicles in India. Although Tata Motors Limited (ADR) (NYSE:TTM)’s brand name is usually associated with Nano, the world’s cheapest car, the company also holds other globally recognized brands like Jaguar and Land Rover (which account for 70% of total sales). The firm is thus exposed to both low-end and premium car segments.
Going forward, the company seems poised to strongly benefit from the increasing government and discretionary spending in India. Moreover, the Jaguar Land Rover acquisition provided the firm with instant access to the premium vehicle segment and with plenty of growth opportunities in the Chinese and Russian markets. In addition, this purchase opened outstanding R&D capabilities that Tata Motors Limited (ADR) (NYSE:TTM) can leverage to overhaul its Indian product line (Morningstar).
Although Nano sales were disappointing at first, the company seems to be taking the right steps to correct this. Same can be said about somewhat weak third-quarter results. Recently, management announced a major restructuring plan that could transform the firm into the second largest automaker worldwide. As a result, analysts expect it to deliver an average annual EPS growth rate of 21% over the next five years. So, trading at under 8 times its earnings, considerably below its peers’ mean valuation, and even paying out dividends, I’d recommend buying this stock.
Bottom line
Trading at very attractive valuations, these three companies offer great entry points for long-term investors. Poised to benefit from the increasing demand for vehicles in emerging markets and the recovery in the European economy, Volkswagen, Fiat, and Tata Motors Limited (ADR) (NYSE:TTM) should be in your portfolio.
The article Germany, Italy, and India in the Auto Market originally appeared on Fool.com and is written by Victor Selva.
Victor Selva has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Victor is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
