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 Auto, Truck & Motorcycle Parts 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 Auto, Truck & Motorcycle Parts 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 Auto, Truck & Motorcycle Parts 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 Auto, Truck & Motorcycle Parts industry for Wednesday, May 29, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Auto, Truck & Motorcycle Parts 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.

Continental AG (ADR)’s Value Grade

Value Grade:

Continental AG is a Germany-based company offering mobility solutions to automotive sector. The Company operates in four group sectors: Automotive, Tires, ContiTech and Contract Manufacturing. Automotive sector offers technologies for safety, brake, chassis, motion and motion-control systems, which is divided into five business areas: Architecture and Networking, Autonomous Mobility, Safety and Motion, Software and Central Technologies and User Experience. Tires sector offers solutions in tire technology, which is divided into five business areas: Original Equipment, Replacement APAC, Replacement EMEA, Replacement The Americas and Specialty Tires. ContiTech group sector develops products and systems made from rubber, plastic, metal, and textiles. It is divided into five business areas: Industrial Solutions Americas, Industrial Solutions APAC, Industrial Solutions EMEA, Original Equipment Solutions and Surface Solutions. Contract Manufacturing sector handles contract manufacturing.

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.

Continental AG (ADR) has a Value Score of 92, which is considered to be undervalued.

When you look at Continental AG (ADR)’s price-to-sales ratio at 0.29 compared to the industry median at 0.55, this company has a lower price relative to revenue compared to its peers. This could make Continental AG (ADR)’s stock more attractive for value investors.

Continental AG (ADR)’s price-earnings ratio is 17.07 compared to the industry median at 16.29. This means it has a higher share price relative to earnings compared to its peers. This could make Continental AG (ADR) less attractive for value investors.

Now, let’s assess Continental AG (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 4.6, when compared to the industry median of 6.9, 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. Continental AG (ADR)’s shareholder yield is higher than its industry median ratio of 0.00%. 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. Continental AG (ADR)’s price-to-book ratio is lower than its industry median ratio of 1.31. This could make Continental AG (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Continental AG (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Continental AG (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 14.49. This could make Continental AG (ADR) more attractive because the lower P/FCF ratio indicates that Continental AG (ADR) 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.

Holley Inc’s Value Grade

Value Grade:

Holley, Inc. is a designer, marketer, and manufacturer of automotive aftermarket products for car and truck enthusiasts primarily in the United States, Canada and Europe. The Company's products span a number of automotive platforms and are sold across multiple channels. It manufactures a diversified line of performance automotive products, including carburetors, fuel pumps, fuel injection systems, nitrous oxide injection systems, superchargers, exhaust headers, mufflers, distributors, ignition components, engine tuners and automotive performance plumbing products. Its portfolio consists of over 70 brands spanning across over 30 product categories. Its brands include Holley EFI, Holley, MSD, Simpson, Powerteq, Accel and Flowmaster, among others. Its Holley EFI brand focuses on electronic fuel injection technology and showcases its new product development engine. Simpson brand is focused on motorsport safety products including helmets, head and neck restraints, seat belts and fire suits.

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.

Holley Inc has a Value Score of 71, which is considered to be undervalued.

Holley Inc’s price-earnings ratio is 23.0 compared to the industry median at 16.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Holley Inc less attractive for value investors.

Holley Inc’s price-to-book ratio is higher than its peers. This could make Holley Inc less attractive for value investors when compared to the industry median at 1.31.

You can read more about Holley 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.

Westport Fuel Systems Inc’s Value Grade

Value Grade:

Westport Fuel Systems Inc. is focused on engineering, manufacturing, and supplying alternative fuel systems and components for transportation applications. Its product offerings sold under a range of established global brands enable the use of a number of alternative fuels in the transportation sector that provide environmental and/or economic advantages as compared to diesel, gasoline, batteries or fuel cell powered vehicles. Its fuel systems and associated components control the pressure and flow of alternative fuels, including liquid petroleum gas, compressed natural gas, liquified natural gas, renewable natural gas or biomethane, and hydrogen. The Company supplies its products in more than 70 countries through a network of distributors, service providers for the aftermarket and directly to original equipment manufacturers and Tier 1 and Tier 2 OEM suppliers. Its products and services are available for passenger car and light-, medium- and heavy-duty truck and off-road applications.

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.

Westport Fuel Systems Inc has a Value Score of 92, which is considered to be undervalued.

Westport Fuel Systems Inc’s price-to-book ratio is higher than its peers. This could make Westport Fuel Systems Inc less attractive for value investors when compared to the industry median at 1.31.

You can read more about Westport Fuel Systems 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 Auto, Truck & Motorcycle Parts 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 Auto, Truck & Motorcycle Parts stocks as well as other industrys.

Choosing Which of the 3 Best Auto, Truck & Motorcycle Parts 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.

• Continental AG (ADR) stock has a Value Grade of A.
• Holley Inc stock has a Value Grade of B.
• Westport Fuel Systems 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 Auto, Truck & Motorcycle Parts 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 Auto, Truck & Motorcycle Parts Stocks

Want to learn more about Auto, Truck & Motorcycle Parts 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 Auto, Truck & Motorcycle Parts Stocks for Wednesday, May 29
• Which Is a Better Investment, Atmus Filtration Technologies Inc or Dorman Products Inc Stock?
• Which Is a Better Investment, Atmus Filtration Technologies Inc or Garrett Motion Inc Stock?
• Which Is a Better Investment, Atmus Filtration Technologies Inc or Modine Manufacturing Co Stock?

AAII Disclaimer

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