Toyota Motor Corp (ADR) (TM) Set to Outperform Both Ford Motor Company (F) and General Motors Company (NYSE:GM)


Despite Toyota Motor Corp (ADR) (NYSE:TM) not being in the top three automakers in the US which comprises of Ford Motor Company (NYSE:F),General Motors Company (NYSE:GM), and a surprise entrant, Tesla Motors Inc (NASDAQ:TSLA), its stock is a strong buy right now. This consensus was reached among Jason Rotman  of Lido Isle Advisors and Erin Gibbs of S&P Capital IQ while being interviewed by CNBC’s Brian Sullivan on ‘Talking Numbers‘.


Both analysts used different approaches to reach at the same conclusion. While Gibbs, who holds Toyota Motor Corp (ADR) (NYSE:TM) in several of her firm’s model portfolios, stressed on Toyota Motor Corp (ADR) (NYSE:TM)’s  excellent growth prospects and attractive value, Rotman used chart analysis to predict where the company’s  stock price is headed.

“[…] It [Toyota Motor Corp (ADR) (NYSE:TM)] is trading at an all-time or multi-year lows, about 10 times forward earnings, and its relatively low compared to its peers. Not only that, we are looking at about 8% to 10% EPS [Earnings Per Share] growth for next year and 13% for the following year, […],” said Gibbs while explaining why Toyota Motor Corp (ADR) (NYSE:TM)  is set out to outperform all other automakers.

 Indeed from the stand point of earnings multiples, Toyota Motor Corp (ADR) (NYSE:TM) whose Forward Earnings Multiple stands at 9.1x is a far more attractive investment than Ford Motor Company (NYSE:F) with 13.3x,  General Motors Company (NYSE:GM) with 12.8x, and  Honda Motor Co Ltd (ADR) (NYSE:HMC) with 10.0x. Furthermore, Toyota Motor Corp (ADR) (NYSE:TM) sold 6.3% more vehicles in August  than in the same month last year. The tally of 246,100 vehicle was 20,000 more than what analysts predicted.

Rotman on the other hand used a key trend line that he constructed by joining the two year lows in fall of 2012, which extrapolates to around $105 for the current period. He clarified that as long as the stock remains above that mark, the dips will continue to be bought until its value reaches around $119-$120. He also said that if we mirror the $60 rally in 2012-2013, we should be looking at a price of $165, but Sullivan reminded him about that particular rally being an exceptional case as it was in fact Bank of Japan’s exceptional monetary policy that pushed all the Japanese stocks to exceptional highs.

On a concluding note, it has been a strong market for automakers lately where auto sales for August have topped most analyst estimates and the sales for year to date haven’t seen a high point as this since 2006. Moreover, with ample credit available and stable gas prices, investment in the sector could certainly bear fruit.

Disclosure: none

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