Electric Car Talk Leaves Some Car Stocks In The Garage

Chris Lau, Kapitall: We talk about Tesla so much, sometimes the other auto stocks get a bit jealous. Let's take a look under the hood. 

It can be hard for investors to stay interested in Ford ( F ) or General Motors ( GM ) when electric car companies are receiving all hype. Ford and GM are valued with a forward P/E of just 9 and 11, respectively, even though sales are rising.

[Read more from Kapitall: Car Stocks Picking Up Speed: Making Sense of the IPOs]

Should investors take some of their profits from Tesla ( TSLA ) shares and consider the traditional auto stocks instead?

Tesla outperforms

Tesla is up four-fold in 2013, and up more than 40% in the last 3 months.

Click on the interactive charts below to see data over time. Sourced from Zacks Investment Research. 

Conversely, Ford shares are flat in the last quarter despite reporting higher sales for nearly all of its models. Sales rose 6% to 185,146 units in September 2013. Breaking the numbers down:
  • Fusion sales rose 62%
  • Fiesta sales rose 29%
  • Lincoln sales declined 5.1%
  • Utilities dropped 4.1%

These sales figures suggest Ford could surpass third quarter earnings estimates. Growth in earnings from Ford Credit may also boost earnings.

Ford and GM shares are performing similarly to that of Toyota ( TM ) and Honda ( HMC ).

GM a turnaround play?

GM is progressing in turning itself around. The company received an investment grade rating from Moody’s last month, and raised $4.5 billion from the sale of debt.

The US Treasury department is also decreasing its holding of GM. The Treasury sold more than 200 million in GM shares, and has around 101 million shares left to sell to the market.

Conclusion

The high valuation of Tesla could be justified, as the company is set to ramp itself up for mass production. But investors should not necessarily ignore the turnaround in auto manufacturing stocks like  Ford and GM.

 

(Written by Chris Lau, a Kapitall Contributor. Disclosure: Author is long F. All data sourced from Zacks Investment Research.)

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