Takeover speculation pushed Fiat Chrysler Automobiles NV (FCAU) to all-time highs this week but the carmaker still looks like a bargain compared to its rivals and even to its own potential as a break up candidate.

Fiat's US-listed shares traded Friday, Aug. 18, at €12.525, up a few cents on their Thursday close. The stock posted an all-time record high closing price of $12.89 on Tuesday a day after a report claimed the company had received and rejected at least one offer from a Chinese automaker.

Even after that M&A kicker Fiat Chrysler looks cheap by most measures. Its core equity valuation weighs in at about 3 times its forecast Ebit of about €8 billion for this year, according to number crunched by Goldman Sachs.

That leaves the Italian car maker's EV/EBIT below Renault SA (RNSDF) , France's biggest car maker, which trades at a 2017 EV/Ebit of 3.5 times and in line with Daimler AG (DDAIF) , Germany's No.2 carmaker. The only European carmaker with a lower EV/Eebit is Volkswagen AG  (VLKAF) which trades at 1.8 times 2017 EBIT.

The valuation looks even cheaper next to the large U.S. manufacturers. General Motors Co. (GM) and Ford Motor Co. (F)  trade at 2017 EV/Eebit ratios of about 7.3 times and 6.9 times, respectively.

On a price to earnings, or P/E, basis Fiat is worth about 4.6 times its estimated 2017 earnings. That is below VW's 5.0 times earnings and Daimler's 6.7 times earnings, and well shy of the European automotive sector average of closer to 11 times earnings. GM and Ford trade at P/E's of 5.9 and 6.1 based on current year estimates.

Chinese auto makers, meanwhile, trade at an average P/E of about 10.7 times forecast 2017 earnings.

1987 Jeep Wrangler.
1987 Jeep Wrangler.

Fiat's relatively low valuation hasn't gone unnoticed, and not just by the Chinese.

Italy's Mediobanca SpA earlier this week noted that the shares were lagging rivals by most measures and tipped that the M&A buzz surrounding the company would spark a re-rating.

Goldman Sachs has a 12-month price target of €19.20 on Fiat, suggesting that despite this week's gains the company could still add 80% over the next year. Goldman is forecasting Fiat's EBIT will grow at an annual compound rate of 25% out to 2018.

Morgan Stanley this week revisited a report first published in January, in which it claimed that there was "substantial hidden value" in several of Fiat's brands that could be unlocked by spin-offs or sales to rival car makers. The bank's analysts suggested that Fiat's Jeep sports utility unit could be worth €14.70 a share as a stand-alone division, making it more valuable than its parent. Fiat's Ram brand pickup trucks might be worth €6.10 a share, noted the analysts led by Adam Jonas.

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