The current global semiconductor shortage continues to affect auto manufacturers, especially electric vehicle (EV) makers. However, governments have been taking steps, and enterprises have been making investments, to ease the semiconductor shortage.
Furthermore, the chip shortage, which has raised the prices of new cars, has led to increased demand for used cars. As a result, the average transaction price for a used car soared to $25,410 in the second quarter of 2021, up 21% year-over-year. Since the demand for vehicles is expected to remain high, with people avoiding mass transit to avoid encountering COVID-19, the auto manufacturing industry is expected to continue growing. According to Statista, 69.8 million cars are expected to be sold this year.
Given this backdrop, it could be wise to bet on the stocks of renowned auto manufacturers Subaru Corporation (FUJHY) and Mazda Motor Corporation (MZDAY), which are priced below $10 per share. They are expected to continue rallying in the near term based on their fundamental strength and growth prospects.
Subaru Corporation (FUJHY)
Headquartered in Tokyo, Japan, FUJHY deals in automobiles and aerospace products. The company operates through three segments: its Automotive Business Unit; its Aerospace Company; and Other Businesses. It manufactures, sells, and repairs passenger cars and airplanes, and aerospace-related machinery and components.
FUJHY’s net revenue increased 39% year-over-year to 6.35 billion yen ($57.72 million) in the first quarter, ended June 30, 2021. Its operating profit came in at 295 million yen ($336 million) compared to a 157 million yen ($1.43 million) loss. Also, its profit was 185 million yen ($1.68 million) compared to a loss of 77 million yen ($700,000) in the year-ago period.
Analysts expect FUJHY’s revenue and EPS to increase 107.8% and 95.3%, respectively, year-over-year to $30.23 billion and $0.90 in its fiscal year 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past 10 years, the stock has gained 218.4% in price to close yesterday’s trading session at $9.50.
FUJHY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FUJHY has a B grade for Value and Stability. In addition , within the Auto & Vehicle Manufacturers industry, it is ranked #10 of 63 stocks. Click here to see the additional POWR Rating for Momentum, Growth, Sentiment, and Quality for FUJHY.
Mazda Motor Corporation (MZDAY)
Based in Hiroshima, Japan, MZDAY manufactures and sells passenger cars and commercial vehicles worldwide. The company’s principal products include four-wheeled vehicles, gasoline reciprocating engines, diesel engines, and automatic and manual transmissions for cars.
On August 24, 2021, MZDAY restructured its China car joint venture with Changan and FAW. MZDAY’ management said , “The three companies aim to utilize every strategic and managerial opportunity in the new joint investment company and strive to make its business and management system optimal to adapt to the needs of the expanding Chinese market.”
MZDAY’s total revenues increased 113.3% year-over-year to 803.4 million yen ($7.30 million) for the second quarter, ended June 30, 2021. The company’s gross profit came in at 181.04 million yen ($1.65 million), up 145.9%. Its total assets were 1.57 trillion yen ($14.26 billion) compared to 1.49 trillion yen ($13.54 billion) in the previous quarter.
For its fiscal year 2022, MZDAY’s revenue is expected to grow 60.3% year-over-year to $31.32 billion. Over the past year, the stock has gained 40.6% in price to close yesterday’s trading session at $4.33.
MZDAY’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, the stock has an A grade for Value, and a B grade for Quality. MZDAY is ranked #7 in the Auto & Vehicle Manufacturers industry. Click here to see the additional POWR Ratings for MZDAY (Growth, Stability, Sentiment, and Momentum).
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FUJHY shares were trading at $9.41 per share on Friday afternoon, down $0.08 (-0.90%). Year-to-date, FUJHY has declined -5.43%, versus a 18.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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