Despite macroeconomic concerns, increased demand is projected to keep auto sales in the US strong. Also, the introduction of new and creative car models is projected to boost sales further.
So, investors interested in investing in quality auto stocks can consider buying Continental Aktiengesellschaft (CTTAY), Garrett Motion Inc. (GTX), and Commercial Vehicle Group, Inc. (CVGI). These stocks are A (Strong Buy) rated in our POWR Ratings system and are currently trading under $10.
The number of new vehicles sold in the U.S. in August was 1,341,169 units, up 16.2% from August 2022 and up 2.0% from July 2023, when supply chains were still constraining output. The increase in new car sales in August implies a solid return in the automotive sector as supply chains gradually stabilize.
The automotive industry is expected to grow at a 6.9% CAGR to $6.07 trillion by 2030. The growth can be attributed to a variety of factors, including technical developments, rising consumer demand, and new markets. Also, the shift toward electric and driverless vehicles is projected to propel the automobile sector forward in the next years.
According to Technavio, the automation market in the automotive industry is expected to grow at a CAGR of 3.9% until 2027, with a market value of $2.08 billion. This expansion can be linked to the increased use of automated technology in the car production process.
In addition, the auto parts market is estimated to grow at a CAGR of 3.6% until 2027.
With these favorable trends in mind, let’s delve into the fundamentals of the three best A-rated Auto Parts stocks, beginning with number 3.
Stock #3: Continental Aktiengesellschaft (CTTAY)
Headquartered in Hanover, Germany, CTTAY is a technology company that offers mobility solutions to the automotive sector globally. It operates in four sectors: Automotive; Tires; ContiTech; and Contract Manufacturing.
CTTAY’s forward EV/Sales of 0.47x is 59.4% lower than the industry average of 1.15x. Its forward Price/Sales of 0.32x is 63.7% lower than the industry average of 0.87x.
CTTAY’s trailing-12-month CAPEX/Sales of 5.37% is 67.1% higher than the industry average of 3.22%. Its trailing-12-month asset turnover ratio of 1.09x is 9.6% higher than the industry average of 1x.
CTTAY’s sales increased 10.4% year-over-year to €10.43 billion ($11.17 billion) in the fiscal second quarter that ended June 30, 2023. Its net income attributable to the shareholders of the parent came in at €208.60 million ($223.37 million) as compared to a net loss of €250.70 million ($268.46 million) in the previous year’s quarter.
Also, the company’s EPS came in at €1.04 as compared to the negative €1.26 in the previous year’s quarter.
The consensus revenue estimate of $45.62 billion for the fiscal year ending December 2023 represents a 9.8% increase year-over-year. Its EPS is expected to grow significantly year-over-year to $0.73 for the same year. It has surpassed EPS estimates in three of four trailing quarters. CTTAY’s shares have gained 26.8% over the past year to close the last trading session at $7.09.
CTTAY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CTTAY also has an A grade for Growth and Stability and a B for Value and Quality. It is ranked #10 out of 59 stocks in the A-rated Auto Parts industry. Click here for the additional POWR Ratings for Sentiment, and Momentum for CTTAY.
Stock #2: Garrett Motion Inc. (GTX)
GTX designs, manufactures, and sells turbochargers and electric-boosting technologies for global light and commercial vehicle OEMs. The company provides light-vehicle gasoline, light-vehicle diesel, commercial vehicle turbochargers, and automotive software solutions.
GTX’s forward EV/EBITDA multiple of 5.26 is 44.9% lower than the industry average of 9.55. Its forward EV/EBIT multiple of 6.45% is 50.9% lower than the industry average of 13.12.
GTX’s trailing-12-month ROTC of 30.26% is 400.2% higher than the industry average of 6.05%, while its trailing-12-month ROTA of 12.76% is 227.9% higher than the industry average of 3.89%.
For the fiscal second quarter ended June 30, 2023, GTX’s net sales increased 17.7% year-over-year to $1.01 billion. The company’s adjusted EBITDA increased 23.2% year-over-year to $170 million. Also, its gross profit increased 19.5% year-over-year to $202 million.
Street expects GTX’s revenue to increase 11.7% year-over-year to $4.02 billion for the year ending December 2023. Its EPS is expected to grow 32.3% year-over-year to $0.99 for the same period. It has surpassed EPS estimates in all of the four trailing quarters. Shares of GTX have gained 18.2% over the past year to close the last trading session at $7.88.
GTX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #9 in the same industry. It has a B grade for Growth, Value, Stability, and Quality. To see additional GTX’s ratings for Sentiment and Momentum, click here.
Stock #1: Commercial Vehicle Group, Inc. (CVGI)
CVGI manufactures and sells components and assemblies for commercial vehicles through its four operating segments: Vehicle Solutions; Electrical Systems; Aftermarket & Accessories; and Industrial Automation.
CVGI’s forward Price/Sales multiple of 0.24 is 82% lower than the industry average of 1.35. Its forward EV/Sales multiple of 0.39% is 77.3% lower than the industry average of 1.71.
CVGI’s trailing-12-month asset turnover ratio of 1.91x is 136.6% higher than the industry average of 0.81x.
In the fiscal second quarter that ended June 30, 2023, CVGI’s revenues increased 4.5% year-over-year to $262.19 million. The company’s adjusted operating and net incomes improved 105.8% and 150.6% from the year-ago values to $16.66 million and $10.68 million, respectively.
Also, its adjusted EPS stood at $0.32, up 146.2% year-over-year. Additionally, adjusted EBITDA came in at $20.77 million, up 67.3%year-over-year.
Analysts expect CVGI’s revenue to increase 4.1% year-over-year to $1.02 billion for the year ending December 2023. Its EPS is expected to grow 102.6% year-over-year to $1.03 for the same period. The stock has gained 35.1% over the past year to close the last trading session at $7.96.
It’s no surprise that CVGI has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and Value and a B for Sentiment and Quality. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated CVGI for Stability and Momentum. Get all CVGI ratings here.
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CTTAY shares were trading at $7.18 per share on Friday afternoon, up $0.09 (+1.30%). Year-to-date, CTTAY has gained 22.25%, versus a 17.24% 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. More...
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