The auto industry is fueled by rising demand for personal and commercial vehicles and the digitalization of automotive repair services. Given the industry’s steady growth prospects, investors could consider quality auto stocks Garrett Motion Inc. (GTX), Continental Aktiengesellschaft (CTTAY), and Commercial Vehicle Group, Inc. (CVGI) for steady gains this month.
The automotive market is expected to keep growing in the coming years because of the rising demand for personal and commercial vehicles, the rise of new technologies like electric and self-driving cars, and the growing awareness of consumer safety and environmental issues.
The global automotive market is expected to grow to $28.70 billion by 2030 at a CAGR of 4.5%.
Moreover, according to ABI Research, global vehicle sales are expected to increase by 3.3% in 2024 and reach the previous high of more than 90 million units in 2025. Also, the rise of Electric Vehicles (EVs) is one of the most significant trends in the automotive space.
In addition, the auto parts market is estimated to grow at a CAGR of 3.6% until 2027. The market expansion is driven by factors including technological advancement, digitalization of automotive repair and maintenance services, and strong aftermarket demand.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Auto Parts stocks, beginning with the third choice.
Stock #3: Garrett Motion Inc. (GTX)
GTX designs, manufactures, and sells turbochargers and electric-boosting technologies for light and commercial vehicle OEMs globally. The company provides light-vehicle gasoline, light-vehicle diesel, commercial vehicle turbochargers, and automotive software solutions.
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 231.4% higher than the industry average of 3.85%.
In 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 at 32.3% year-over-year to $0.99 for the same year. Also, the company topped the consensus revenue estimates in each of the four trailing quarters, which is impressive.
Over the past year, the stock has gained 15.2% to close the last trading session at $7.60.
GTX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong 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 a B grade for Growth, Value, Stability, and Quality. It is ranked #10 out of 60 stocks in the A-rated Auto Parts industry.
Click here to see the other ratings of GTX (Momentum and Sentiment).
Stock #2: 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 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 pays $0.17 annually as dividends. This translates to a yield of 2.25% at the current market price, compared to the four-year average dividend yield of 2.56%.
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.
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 $45.54 billion for the fiscal year 2023 represents a 9.6% increase year-over-year. Its EPS is expected to grow significantly year-over-year to $0.73 for the same year. Also, the company topped the consensus revenue estimates in three of the four trailing quarters.
CTTAY’s shares have gained 27.3% over the past year to close the last trading session at $7.19.
CTTAY’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.
It has an A grade for Growth and Stability and a B in Quality and Value. Within the same industry, it is ranked #8.
Beyond what is stated above, we’ve also rated CTTAY for Momentum and Sentiment. Get all CTTAY ratings 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.
On July 26, 2023, CVGI opened an additional manufacturing facility in Aldama, Mexico. The 90,000-square-foot building will expand the capacity of CVG’s fast-growing electrical business, which designs and manufactures electrical components for some of the world’s largest electric commercial vehicle brands.
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, while its gross profit grew 75.5% from the prior-year quarter to $38.40 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.
CVGI’s adjusted EPS stood at $0.32, up 146.2% year-over-year. Additionally, adjusted EBITDA came in at $20.77 million, representing a 67.3% increase from the same quarter last year.
Analysts expect CVGI’s EPS for the third quarter (ending September 30, 2023) to increase 62.2% year-over-year to $0.24. Its revenue estimate of $254.42 million for the same quarter is expected to grow 1.2% year-over-year.
Over the past year, the stock has surged 37% to close the last trading session at $8.33.
It’s no surprise that CVGI has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Value and Growth and a B in Sentiment and Quality. Within the same industry, it is ranked #7.
In addition to the POWR Ratings we’ve stated above, we also have CVGI’s ratings for Momentum and Stability. Get all CVGI ratings here.
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CTTAY shares were trading at $7.14 per share on Friday morning, down $0.05 (-0.70%). Year-to-date, CTTAY has gained 21.57%, versus a 17.63% 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. More...
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