Legacy car makers have been around for decades, defining the automotive industry and adapting to its ever-changing landscape. As they transition into the era of electric vehicles (EVs) and autonomous technology, their financial metrics tell a fascinating story of value and performance. In this analysis, I ranked six prominent legacy car makers based on key valuation metrics.
The Contenders
The companies I evaluated are:
- Ford (F)
- General Motors (GM)
- Honda (HMC)
- Stellantis (STLA)
- Volkswagen (VWAGY)
- Toyota (TM)
Each company’s financials paint a different picture, and the results are nothing short of intriguing. Let’s dive into how these legacy giants stack up against each other.
Ranking by Valuation Metrics
Legacy Car Makers: Key Valuation Metrics
| Company | P/E | P/S | P/B | ROE | D/E |
|---|---|---|---|---|---|
| F | 11.27 | 0.22 | 0.93 | 7.96% | 3.55 |
| GM | 5.53 | 0.31 | 0.80 | 15.50% | 1.80 |
| HMC | 7.07 | 0.35 | 0.60 | 7.95% | 0.85 |
| STLA | 2.65 | 0.19 | 0.45 | 9.58% | 0.36 |
| VWAGY | 3.45 | 0.14 | 0.25 | 6.92% | 1.43 |
| TM | 10.05 | 0.92 | 1.25 | 12.40% | 1.06 |
P/E Ratio
This metric reflects how much investors are willing to pay for a company’s earnings over the past 12 months. Lower values suggest potential undervaluation.
- Stellantis (STLA): With the lowest TTM P/E ratio of 2.65, Stellantis stands out as a value play.
- Volkswagen (VWAGY): Close behind at 3.45, it’s another strong contender.
- Ford (F): On the other end, Ford’s higher ratio of 11.27 indicates a pricier valuation compared to peers.
P/S Ratio
The price-to-sales ratio measures how much investors are paying per dollar of sales.
- VWAGY leads with an impressively low P/S ratio of 0.14, making it a standout in terms of sales valuation.
- Toyota (TM): Its higher P/S of 0.92 suggests a premium valuation, possibly reflecting its market leadership and brand strength.
P/B Ratio
This metric compares a company’s market value to its book value.
- STLA and VWAGY shine again with ratios of 0.45 and 0.25, respectively. These figures highlight their potential undervaluation relative to assets.
- Toyota (TM): At 1.25, it’s on the higher side, signaling a premium valuation for its established reputation.
ROE (Return on Equity)
ROE evaluates a company’s profitability relative to shareholders’ equity.
- General Motors (GM): Leads with an impressive 15.5%, showcasing its profitability.
- Stellantis (STLA): A strong second with 9.58%, reinforcing its position as a financially solid company.
- Volkswagen (VWAGY): Lower at 6.92%, suggesting room for improvement.
D/E Ratio (Debt-to-Equity)
Debt management is critical in a capital-intensive industry like automotive.
- Stellantis (STLA): A low D/E of 0.36 highlights its conservative debt strategy.
- Ford (F): On the other end, a high D/E of 3.55 raises concerns about financial leverage.
The Rankings
Considering all metrics, here’s how the six legacy car makers rank overall:
- Stellantis (STLA): With a stellar performance across almost all metrics, STLA is the clear winner for value-oriented investors.
- Volkswagen (VWAGY): Its low P/S and P/B ratios make it a strong contender.
- General Motors (GM): Excellent ROE and moderate valuation metrics secure its position.
- Honda (HMC): Decent across the board but doesn’t particularly stand out in any category.
- Toyota (TM): Strong brand value but higher valuation metrics make it less attractive for value investors.
- Ford (F): While still a formidable company, its high debt levels and pricier valuation push it to the bottom of the list.
Final Thoughts
Legacy car makers are navigating uncharted waters as they compete with EV-focused startups and invest heavily in new technologies. Evaluating these companies based on valuation metrics reveals significant differences in how the market perceives their potential.
If you’re looking for value, Stellantis and Volkswagen emerge as top choices. However, profitability leaders like GM may appeal to those seeking robust financial performance.
Let us know your thought ! Happy investing!
