In this article, I have evaluated prominent auto stocks, Suzuki Motor Corporation (SZKMY) and Ford Motor Company (F), to determine which could be a better buy. After thoroughly evaluating these stocks, I think SZKMY is a superior choice to F for the reasons discussed in this article.
The automotive industry’s growth is driven by global demand for vehicles, the adoption of advanced technologies, and increasing demand for electric and hybrid vehicles with an increasing focus on sustainability and energy efficiency.
The global market for automotive manufacturing equipment is expected to reach $11.4 billion by 2028, growing at a CAGR of 11.1%.
Additionally, shared mobility services like ride-hailing and car-sharing are becoming more popular. This is likely to increase the demand for cars, especially in cities, and help the automotive market grow.
In terms of price performance, SZKMY is a clear winner, with 10.2% gains over the past six months compared to F’s 5.2% decline. Also, SZKMY has gained 15.8% over the past nine months compared to F’s 1.5% decline.
Here are the reasons why I think SZKMY might perform better in the near term:
Recent Developments
On August 8, 2023, SZKMY announced to acquire all of the shares of Suzuki Motor Gujarat (SMG), a wholly owned subsidiary of the Company.
Conversely, on August 29, 2023, F revealed new charging hardware added to its suite of end-to-end solutions to help make it easier for commercial customers to transition their fleets to electric.
Recent Financial Results
For the fiscal first quarter ended June 30, 2023, SZKMY’s net sales increased 13.7% year-over-year to ¥1.21 trillion ($8.18 billion). Its operating profit rose 33.9% over the prior-year quarter to ¥99.80 billion ($675.45 million). The company’s profit increased 14.6% year-over-year to ¥77.30 billion ($523.13 million).
On the contrary, F’s revenues increased 11.9% year-over-year to $45 billion in the fiscal second quarter that ended June 30, 2023. Its adjusted net income increased 6.5% year-over-year to $2.93 billion. Its adjusted EPS increased 5.9% year-over-year to $0.72.
However, its total costs and expenses increased 13.9% year-over-year to $42.29 billion.
Past and Expected Financial Performance
SZKMY’s revenue has increased at a CAGR of 4.3% over the past five years. Its revenue is expected to increase 113.9% this year and 12.1% in the second quarter ending September 2023.
Conversely, Over the past five years, F’s revenue grew at a 1.4% CAGR. Analysts expect F’s revenue to increase by 17.1% this year and 25.5% in the third quarter ending September 2023. Its EPS is expected to increase 10.2% this year and 50.3% in the current quarter ending September 2023, and decline 49% in the next quarter ending December 2023.
Valuation
SZKMY’s forward EV/EBITDA multiple of 5.26 is lower than F’s 10.29. Additionally, SZKMY’s forward EV/Sales multiple of 0.61x is lower than F’s 0.94x.
Thus, SZKMY is more affordable.
Profitability
SZKMY’s trailing-12-month CAPEX/Sales of 5.20% is higher than F’s 4.43%. In addition, SZKMY’s trailing-12-month net income margin of 4.80% is higher than F’s 2.44%.
Thus, SZKMY is more profitable.
POWR Ratings
SZKMY has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. Conversely, F has an overall rating of C, translating to a Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. SZKMY has an A grade for Stability, which is in sync with its 24-month beta of 0.63. On the other hand, F has a C grade for Stability, which is justified by its 24-month beta of 1.57.
Moreover, SZKMY has a B in Quality. Its trailing-12-month EBIT margin of 7.85% is 7.9% higher than the industry average of 7.28%. Its trailing-12-month net income margin of 4.80% is 11.6% higher than the industry average of 4.30%.
In contrast, F has a C grade for Quality. F’s trailing-12-month EBIT margin of 4.31% is 40.8% lower than the industry average of 7.28%. Its trailing-12-month net income margin of 2.44% is 43.4% lower than the industry average of 4.30%.
Among the 55 stocks in the Auto & Vehicle Manufacturers industry, SZKMY is ranked #9, while F is ranked #30.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Momentum, Value, and Sentiment. Get all SZKMY ratings here. Click here to view F ratings.
The Winner
The auto industry is fueled by rising demands for personal and commercial vehicles and the digitalization of automotive repair services. Industry players such as SZKMY and F are well-positioned to benefit from these industry tailwinds.
However, F's relatively low profitability and elevated valuation multiples make its competitor SZKMY the better buy.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturers here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
SZKMY shares were trading at $161.31 per share on Monday afternoon, up $0.99 (+0.62%). Year-to-date, SZKMY has gained 25.45%, versus a 17.82% 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.
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