Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Heavy Machinery & Vehicles industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Heavy Machinery & Vehicles Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Heavy Machinery & Vehicles Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Heavy Machinery & Vehicles industry for Wednesday, May 22, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Heavy Machinery & Vehicles industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Allison Transmission Holdings Inc’s Value Grade

Value Grade:

Allison Transmission Holdings, Inc. is a designer and manufacturer of propulsion solutions for commercial and defense vehicles. The Company is also a manufacturer of medium-and heavy-duty fully automatic transmissions. Its products are used in a variety of applications, including on-highway trucks, including distribution, refuse, construction, fire and emergency; buses, including school, transit and coach; motorhomes, off-highway vehicles, and equipment, including energy, mining and construction applications; and defense vehicles, including tactical wheeled and tracked. The Company operates in approximately 150 countries. The Company has manufacturing facilities in the United States, Hungary and India, as well as global engineering resources, including electrification engineering centers in Indianapolis, Indiana, Auburn Hills, Michigan and London in the United Kingdom. The Company also has approximately 1,600 independent distributor and dealer locations worldwide.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Allison Transmission Holdings Inc has a Value Score of 63, which is considered to be undervalued.

When you look at Allison Transmission Holdings Inc’s price-to-sales ratio at 2.14 compared to the industry median at 0.80, this company has a higher price relative to revenue compared to its peers. This could make Allison Transmission Holdings Inc’s stock less attractive for value investors.

Allison Transmission Holdings Inc’s price-earnings ratio is 10.09 compared to the industry median at 15.53. This means it has a lower share price relative to earnings compared to its peers. This could make Allison Transmission Holdings Inc more attractive for value investors.

Now, let’s assess Allison Transmission Holdings Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 8.4, when compared to the industry median of 10.0, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Allison Transmission Holdings Inc’s shareholder yield is higher than its industry median ratio of 0.28%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Allison Transmission Holdings Inc’s price-to-book ratio is higher than its industry median ratio of 2.18. This could make Allison Transmission Holdings Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Allison Transmission Holdings Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Allison Transmission Holdings Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 21.18. This could make Allison Transmission Holdings Inc more attractive because the lower P/FCF ratio indicates that Allison Transmission Holdings Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Kubota Corp (ADR)’s Value Grade

Value Grade:

KUBOTA CORPORATION is a Japan-based company principally engaged in the provision of agricultural machines, engines and construction machines. The Company operates in three business segments. Machinery segment manufactures and sells agricultural machines and agricultural products, such as tractors, tillers, combine harvesters, rice planters, lawn mowers. The Segment also provides construction machinery and engines for agricultural machinery, construction machinery, industrial machinery and generators. Water & Environment segment manufactures and sells pipe-related products, such as ductile iron pipes, synthetic pipes, pumps and valves. The Segment also provides environment-related products and social infrastructure-related products such as raw materials and spiral steel pipes. Others segment mainly provides logistics and financial services, roofing materials and exterior wall materials.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Kubota Corp (ADR) has a Value Score of 75, which is considered to be undervalued.

Kubota Corp (ADR)’s price-earnings ratio is 11.4 compared to the industry median at 15.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Kubota Corp (ADR) more attractive for value investors.

Kubota Corp (ADR)’s price-to-book ratio is higher than its peers. This could make Kubota Corp (ADR) less attractive for value investors when compared to the industry median at 2.18.

You can read more about Kubota Corp (ADR)’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Manitowoc Company Inc’s Value Grade

Value Grade:

The Manitowoc Company, Inc. is a provider of engineered lifting solutions. The Company, through its wholly owned subsidiaries, designs, manufactures, markets, distributes, and supports comprehensive product lines of mobile hydraulic cranes, lattice-boom crawler cranes, boom trucks, and tower cranes under the Aspen Equipment, Grove, Manitowoc, MGX Equipment Services, National Crane, Potain, and Shuttlelift brand names. Its segments include Americas segment, Europe and Africa (EURAF) segment and Middle East and Asia Pacific (MEAP) segment. The Americas segment includes the North America and South America continents. The EURAF segment includes the Europe and Africa continents, excluding the Middle East region. The MEAP segment includes the Asia and Australia continents and the Middle East region. Its crane products are used in a variety of applications throughout the world, including energy production/distribution and utility, petrochemical and industrial, and infrastructure.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Manitowoc Company Inc has a Value Score of 85, which is considered to be undervalued.

Manitowoc Company Inc’s price-earnings ratio is 17.0 compared to the industry median at 15.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Manitowoc Company Inc less attractive for value investors.

Manitowoc Company Inc’s price-to-book ratio is higher than its peers. This could make Manitowoc Company Inc less attractive for value investors when compared to the industry median at 2.18.

You can read more about Manitowoc Company Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Heavy Machinery & Vehicles Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Heavy Machinery & Vehicles stocks as well as other industrys.

Choosing Which of the 3 Best Heavy Machinery & Vehicles Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Allison Transmission Holdings Inc stock has a Value Grade of B.
• Kubota Corp (ADR) stock has a Value Grade of B.
• Manitowoc Company Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Heavy Machinery & Vehicles industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Heavy Machinery & Vehicles Stocks

Want to learn more about Heavy Machinery & Vehicles stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Heavy Machinery & Vehicles Stocks for Wednesday, May 22
• Is CNH Industrial NV (CNH) a Good Dividend Stock?
• Is CNH Industrial NV (CNH) Stock a Good Investment?
• Which Is a Better Investment, CNH Industrial NV or Kubota Corp (ADR) Stock?

AAII Disclaimer

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