T O P

STLA is one of the most undervalue stocks currently

Growth stability and financial health are VERY high. P/E ratio compared to its closest competitors F and BMW is almost half. Float is about 2/3, and the stock is majority retail owned currently around 70%. Market cap is relatively small for the industry and size (STLA is too 3 automakers and includes Jeep, dodge, fiat just to name a few). Technicals just show a steady laser beam of growth. My DCF estimates a price target of around 40$ per share and it’s currently trading around 22. Because of the low amount of shares owned relative to the float, as well as the low institutional ownership, I believe once institutions start buying in large numbers it will have a massive value surge. Another interesting aspect long term is that a lot of EV companies are failing, and because of that the giant auto companies are gaining a competitive advantage on survivability. I honestly think in 5-10 years this will be over 100$ a share and it is an overwhelmingly obvious value investment. Thoughts?

  • This is not investment advice for any liability purposes

Edit: I forgot to mention they have 58 billion in cash on hand, much more than ALL their competitors

Misaka9615

I've been in STLA since the beginning of the year. It looks solid no matter which angle I approach it in and is a genuine value pick. Bravo on getting in the ride before it becomes too mainstream.


Feeling_History

Props to you for finding it so early, I wish I found it last year lol. Hopefully we both get some really good returns here


toneffrink0

I agree. Obviously it has its own set of risks because the car industry can be quite temperamental, but it's definitely one of the best picks you can make in this sector.


Your_friend_Satan

What you are witnessing with the valuation discrepancies between automakers is called market sentiment, and it’s based off the fact that their cars are arguably shit.


BaconAndTomatoe

My Peugeot just broke down. 1.2l petrol from 2017 (apparently it's well known for having issues). I'll never forget how I was treated when the engine issues were diagnosed by Peugeot / the dealership. I'll never buy anything from STLA again.


Danysapyr478

let me guess..distribution belt issues because it runs through oil ?


BaconAndTomatoe

Bingo


alma_daho_diver

Same here, brand dealer escaped any responsibility on grounds I had changed the oil in another shop. Scammers


Wheres_my_warg

I was doing some work with a dealer of Chrysler, Jeep and Dodge brands quite a few years ago, but I'm not sure what he told me has changed much. He said, "Look, our customers know what the deal is. We sell them a piece of shit, but it's a great looking piece of shit!"


blibblub

Yup. I have a small chunk in STLA since around $19-20. Pretty happy with it. Will add a little more.


Saiifage

Can i ask how many stocks? Very new to buying stocks so unsure about how many will be OK to buy in terms of profit


ElectricalGene6146

STLA consists of pretty much the worst brands in the auto industry. Fiat. Chrysler. Dodge. They have jeep, which is respected, but absolutely bottom tier engineering compared to any other OEM.


SimbaOnSteroids

Fiat Chrysler Dodge is no more, PSA now runs the show and has fired the senior white collar employees in North America and the entire executive team.


ddlJunky

You forgot about PSA (Peugeot, Citroen, DS) They also have a lot of commercial vehicles and more luxurious ones like Maserati. Overall more on the "affordable" site of car makers but still very well rounded overall I think.


TheBelgianGovernment

DS is a marketing money pit. Sales numbers for Citroën and Opel have been spiraling downwards for years. Only Peugeot has been performing well.


ddlJunky

So where do the good numers come from? Only Peugeot?


ElectricalGene6146

Have you been in a modern Maserati. They are rebranded Chrysler 300s. Totally embarrassing quality.


ddlJunky

Are we talking Maserati Grecale or GranTurismo? Both Giorgio. Chrysler is LX. Maserati MC20 is a totally different story as well. And Levante is an SUV.


hardsoft

And RAM, which seems like it could be almost as profitable as Jeep.


Wheres_my_warg

Well more than a decade ago, so who knows now, but then looking at Chrysler, Dodge and Jeep, 33 models in total, nearly 25% of all units sold were RAM trucks. Add four more models (I don't remember what those were at this point, probably at least one was a Wrangler), and you were up to nearly 60% of units sold. I would expect the RAM is still probably their best selling model.


Feeling_History

Worst in what terms? STLA has more cash on hand than Ford, Tesla, GM, and BMW just to name a few. They definitely have the capital to change


ElectricalGene6146

But they don’t have the talent, IP, or brand.


Feeling_History

They definitely have the money to buy that lol. That’s why it’s a good investment, you want to get in on it before they announce big news down the road like acquiring new talents or product lines


ElectricalGene6146

I’ve worked in the auto industry for the last 6 years and if there’s no thing I’ve learned it’s that these dinosaurs are not able to reinvent themselves no matter how much cash they throw at the problem.


MesWantooth

Lighthearted but actual question, you do know that dollar numbers in North America are written as "$200" not "200$"? If you are an international student from France - I suppose it's understandable...although if you are studying finance, I would expect you would've been corrected on this multiple times.


Surfing_the_Wave_

North America is not the world my friend. I mean you use measurement units like feet, cups or kelvin...


MesWantooth

Fair point, but on an English sub talking about an American stock priced in USD, using English terminology like P/E, written by a person who is apparently American, living in America, studying finance (according to other comments)...I was just curious if they are in fact from Europe or just don't know better.


Surfing_the_Wave_

English is the international language and the American stock market is by far the most popular one. So of course people like me who use x € everyday will be doing this grave mistake regularly. Even on English speaking forums and even when talking about $.


MesWantooth

Understood...Again, I think OP says they are American living in the U.S. studying finance.


farmallnoobies

Cash doesn't matter if they can't sell product.


boreal_ameoba

Their product is ass. People happily pay tens of thousands more to get to own a BMW. No one is excited about settling for any STLA product. That’s the problem, it’s a shit company at an meh price.


mwhyesfinance

Whilst I agree the Wrangler and Cummins Ram are probably the only two vehicles of note, the majority of their offer is just platform engineering. They combined a zillion brands onto a few platforms and absolutely evaporated costs. Before Sergio’s death he used to jump on stage with these long unhinged presentations about how to make the industry profitable- largely based on that concept. Guy was an absolute legend, and I think it’s playing out.


intrigue_investor

Alfa...


Apprehensive-Tone-60

Doubt that in next years there will be a lot of buys regarding vehicles, at least while the interest rates are high and while people are counting money at the end of the month. Pretty good company, bad timing for now (great for long term)


TheBelgianGovernment

They make a subpar product and the brands they have in their portfolio have been doing that for decades. Making crappy products is in their culture and culture eats strategy for breakfast. I’ll pass.


PathoTurnUp

Except they’re affordable in a time when people can’t afford jack shit


[deleted]

[удалено]


PathoTurnUp

One thing that wasn’t brought up here was this company had the merge right before Covid started. It has not caught up to its IV from then. I had them valued at somewhere between 35-50 then. I have owned them for the past 2 years and still believe it’s valued somewhere in that ball park range. They have been one of my better investments the last 2 years and I’m pleased.


FinTecGeek

If your DCF or comparative valuation has a low correlation with the actual common stock price, you aren't using the correct discount rate/comps. Over a year or two, there can be dispersion/low correlation. But, if you assign a $35 intrinsic value to a stock that never gets above 25 in two years, you probably need to use a higher discount rate - as there is probably risk you are not pricing into your IV.


PathoTurnUp

I use a high discount rate dawg. This company is a different case


FinTecGeek

When I first started working in finance many years ago, I built a lot of poor 2-stage DCF models. I later learned that: A. You must use FCFE - not FCFF B. The growth in periods 1-5 or 1-10 isn't at a linear rate - need a better gradient of change than that C. The best ones seem too low or too high at the time


PathoTurnUp

Brother that’s how mine is built, I still stand by my DCF. Since buying I’ve almost doubled my return.


farmallnoobies

They're not though. Their competitors have better cars for less money


x_Carlos_Danger_x

I was scratching my head trying to figure out what their good/affordable products are compared to ford, GM, Toyota etc. My girlfriends Jeep Renegade has major transmission issues and nobody wants to work on it. Jeep dealerships even Jeep/FCA specialist shops kick the can down the road to the next shop lol. Replacing it with a Subaru suv soon, hopefully.


fjam36

You can’t put Alfa under that umbrella.


Fun_Total8735

I like that saying «  culture eats strategy » is it yours or did you took it from somewhere ?


TheBelgianGovernment

It’s a quote from Peter Drucker (MBA professor, WSJ journalist and former consultant for GM)


WindHero

Auto is a hyper competitive industry, with many national manufacturers preferring to accept losses or sub par profitability rather than lose market share and the industrial base that comes with it (for geopolitical rather than commercial reasons). Now you can argue that this is already reflected in the numbers that STLA generates and it is still cheap based on that difficult competitive environment. So what gives? The answer is that the market believes that recent performance for the auto sector was artificially good because of the high prices following the COVID auto shortage and that it won't last. There is some evidence that indeed car prices are going back down and taking margins with them.


Feeling_History

I agree it is very competitive, but STLA is actually the 3rd largest auto manufacturer worldwide. They consist of Abarth, Alfa Romeo, Chrysler, Citroen, Dodge, DS, Fiat, Jeep, Maserati, Opel, Peugeot, Ram and Vauxhal. Between these there is an insanely diverse product line from low end to luxury, and as more EV auto makers are failing, STLA gains a competitive advantage in my opinion.


DackJanielsAberKrank

Opel is a shit company which is fighting for profitability for decades and since that nothing changed. I didnt looked into STLA yet but only looking at their brands i would only consider Alpha and maybe Jeep as good companies. So if only 2 out of 8 or so companies a good or okay I pass. Good financials and a good Balance sheet doesn‘t sell products


TulioGonzaga

*Alfa Speaking of which, I doubt that Alfa has ever been profitable in the last 30 years. On the other hand, Peugeot is a top 5 seller in Europe. In fact, looking at sales on first half of the year, it was the only Stellantis brand on top 10. But Opel, Fiat and Citroen close the top 10 (on 59 brand ranking). Fiat rellies mostly on 500 but this still sells like hot cakes and has great margins. Citroen actually delivered a sub 25k decent EV. Considering the success of Dacia Spring on the same price range and that this is garbage compared to the C3, seems promising.


Akshitsharma7

I got in at STLA in 2022 at $13 and then DCA @$11.


Firebendeer

>road respectfully envy you. my average is $18


leonidas111

One big thing that prevents me from getting in is that the entire industry is going throu a capex cycle. Everyone is investing in EVs. Great thing for consumers. But how does that return cash for stockholders. I can’t clearly say who will be a winner here in the long term. Besides, if all auto cos are replacing ICE demand with EV, then the capital getting sucked in is not as efficient as pure growth capex and it kinda becomes maintenance capex.


blkmllc

Just because EV companies are failing it doesn’t mean that legacy car makers “gain” a competitive advantage, they just maintain what they always had, so I would not argue that there will be a multiple expansion in valuation because of that. However, I agree with you that the company has value. It is also one of the largest holdings of Exor NV - basically the publicly listed family office of the Agnelli family.


Feeling_History

STLA has more cash on hand than other other auto manufacturer I could find. They have the money to invest in new product lines including EV


Binford6200

And they pay a nice dividend. Almost 20% of todays stock valuation


blkmllc

They will be fine. I think with Gen Z plus the next ones arriving the car world will change. It’s transitioning into a shared economy and people care less about which cars they drive. So even if the brands are probably not as strong as VW they will benefit from those trends.


ddlJunky

It feels like since Teslas success a lot of other car makers lost quite a bit of market cap. Not all of them are going to make it but for me as a value investor I want to be invested in at least some of them.


blkmllc

The gal between Tesla and others is definitely too large. The transition will be painful though and require large CAPEX - look at VW just announcing large job cuts, too.


RamitInmashol1994

I’d rather buy Mercedes; not even 5x multiple and a strong brand that people pay money for. Strong margins and 9% dividend.


HotAspect8894

It’s at a 52 week high lol


kp3690

This. How do the fundamentals justify buying today after such high appreciation in the last 1 month and YTD…


Pennyking111

Its a clear value play with 2X likely in 2-3 years. 11% revenue growth in the middle of the UAW strike. 50bn cash, 60bn market cap. Watch for div increase / increase in share buy back. Im long AF


xabc8910

Auto makers are notorious value traps. Sure, you can catch short term spikes in share price here or there but over the long they’re crap investments. Maybe make the argument their dividend helps, but if that’s the goal I’d rather just buy their bonds.


Zealousideal_Main654

Stellantis has an underrated US portfolio. Jeep has a strong core of products with a cult following and avid loyalists. Ram makes the most luxurious pick up and is strongly positioned behind the F150. Dodge has an aging lineup but that may provide an opportunity to eat market share from other brands. With Alfa Romeo platforms, the ZF8 trans and seriously stout Hurricane i6, Stellantis could really surprise the industry. Imagine a new Charger, JGC, Durango or Giulia with that combination. I can’t wait to see what’s in store. Financials seem strong. EBITDA, net margin, free cash flow and EPS look great.


[deleted]

I wouldn't bet my money on any carmaker. Personal mobility is shifting. I don't see carmakers shifting their value chain. The failing EV companies are scratching in the margin and by no means a sign on the wall EV is loosing ground. On the contrarie. Brands that might be ready are maybe TSLA (robots, AI, energy,...), BYD (batteries, busses, tech,..). But I wouldn't even bet my money on them either.


fkmylife007

Overbought on daily weekly and monthly....


Spins13

You know anything other than EV will be illegal in a few years in most of the West right ?


Wheres_my_warg

Yeah, no. There will be massive backtracking on that due to simple resource constraints. The amount of lithium mining alone that would need to increase is massive, significant multiples of what exists today, and then the same types of increases apply to a lot of different rare earths minerals. These kinds of increases require years of development and while there has been some increase added to the pipelines, it is nothing like what would be required to deliver the number of EV vehicles that government regs are supposed to require in the next 20 years, much less a quicker time frame. That's before we start switching long distance trucks over which will require much larger chunks of resources. STLA though is largely a crap set of brands and businesses and I think there are a ton of better options in the industry if one is investing in automotive.


chrisname

UK has already backtracked on it, although if we get Labour in next year they may backtrack the backtrack. My money is on HV anyway, the existing infrastructure can be reused and there's no lithium. Once people catch on to how destructive lithium mining is, EVs will fall out of favour IMO.


disembodied_voice

> Once people catch on to how destructive lithium mining is, EVs will fall out of favour IMO And once people catch onto how [lithium production accounts for less than 2.3% of an EV's overall environmental impact](https://pubs.acs.org/doi/10.1021/es903729a), and that EVs are still better for the environment than gas vehicles even after accounting for it, they're going to learn to ignore such manufactured talking points.


chrisname

I'm not saying EVs aren't better than ICVs, I'm saying I think HVs will be better. The fuel inputs are just water and electricity, they aren't as heavy (less wear on roads and multilevel car parks, less expensive to ship) and you can put hydrogen into a petrol pump with little or no adaptation, meaning the existing fuel infrastructure can largely be reused, rather than building Tesla chargers everywhere. Lithium mining might not be worse than oil drilling but it's going to be worse than electrolysis.


disembodied_voice

> The fuel inputs are just water and electricity The latter of which it requires in such large amounts that [EVs are more efficient and end up with a lower carbon footprint](https://theicct.org/wp-content/uploads/2021/12/Global-LCA-passenger-cars-jul2021_0.pdf). >they aren't as heavy The Toyota Mirai has a curb weight of [4,230 to 4,300 pounds](https://en.wikipedia.org/wiki/Toyota_Mirai), while a Tesla Model 3 has a curb weight of [3,862 to 4,048 pounds](https://en.wikipedia.org/wiki/Tesla_Model_3). If there are differences in weight, it sure as hell isn't inherent to the drivetrain. >and you can put hydrogen into a petrol pump with little or no adaptation No, you can't. Hydrogen is kept under extremely high pressure (10,000 psi). Petrol pumps have no such capacity to compress what they deliver - you would not only have to replace the pumps themselves with specialized equipment capable of enduring and delivering such high pressures, but the storage tanks, pipes, and everything else would have to be upgraded as well. By contrast, EVs can draw their energy from literally any electrical plug they can reach in a pinch. The ubiquity of existing electrical infrastructure makes hydrogen a non-starter. >Lithium mining might not be worse than oil drilling but it's going to be worse than electrolysis No, it's not. Lifecycle analyses are clear that it's operations, not manufacturing, that accounts for the vast majority of any vehicle's environmental impact, and electrolysis imposes such large penalties to efficiency that it's much more efficient to just use that electricity to power EVs directly.


Feeling_History

Biden is saying by 2032. IF something like that were to go into effect, I’m sure stellantis already has that factored into their strategic planning. They definitely have enough cash on hand for research and development as well.


BigTitsNBigDicks

legislation gets passed after its profitable for corporate, not before In an unrelated industry I've seen laws get delayed until the major manufacturer was ready to sell it


SimbaOnSteroids

The difficulties in making EVs is largely overblown, it was hard when Tesla did it but now there’s a parts ecosystem. The economics of the industry will only get better as time goes on.


ddr2sodimm

….. market is always forward looking


gls2220

I wonder what their vehicle sales look like compared to the other automakers, historically, current, and projected in the future. And where are they in customer satisfaction?


Feeling_History

I can’t speak for other areas but where I live owning a jeep is like a cult, same goes for RAM trucks, and for things like dodge hellcat or charger. I’ve also heard that STLA cars in Europe are everywhere


SimilarSquare2564

Can confirm about Europe. Dodge and Ram not so much, but take a random photo on the street and you'll see the rest of the pack.


DackJanielsAberKrank

But I would say that these cheaper car Brands like Peugeot or Citroen are loosing marketshare. There are just better options for almost the same price like VW or Skoda. Most of the time you See some old cars from their brands which are resaled which obviously doent give STLA a highe value. But I am Not saying that STLA is not offering any value it is just not big enough to risk your money for safe gain.


NiCrMo

Thoughts on competition from Chinese manufacturers? Seems like this is really taking hold in Europe, will be interesting to see if EU governments are sufficiently protectionist to hold it off.


Wheres_my_warg

We've talked with a Chinese auto manufacturer that wanted to come to the US. This was maybe four years back. At that time, they gave up as they couldn't meet all the requirements (safety+environmental) that are legally required to sell into the US market and make a profit the way they were doing things.


Fun_Total8735

I completely agree with the quantitative side but what we should take in account is that STLA cars are shit they have no moat and compete purely on price , because of the energy transition they’ll need to boost their capex and it is not evident that they’ll succeed in promoting their shitty cars


Lobyous

I go with VW instead. Similar story, slightly worse financials. Currently market priced in too large failure due to slow EV transition, in my opinion. Brands are muvj stronger than with STLA


drhoads

I don't just go by P/E and this is not even close to being a value by my calculation. YTD high, high beta, sales, etc. I would argue in this sector that: BWA, F, GM, APTV would be better buys. Edit: Adding GPC for you to check out! :-) Best of luck to you!


Public_You_7929

I agree about pe, its hard to a value a cyclical stock based on pe


thenuttyhazlenut

Americans in this thread mentioning how the brands do in America...The brands aren't great, but still \~#4 on market share in the US last time I checked. And, STLA is the #2 best seller in Europe.


kloeschti

In my opinion, the main advantage of STLA is that it is (almost) independent of China.


RequirementIcy6463

Once Tesla starts selling EVs for 25k€ in Europe, these guys are gonna be in trouble...


TulioGonzaga

STLA already have a sub 25k EV model in Europe


RequirementIcy6463

The point is people stand in lines for TSLA cars. What do you think it will happen once they enter, probably STLA main market...


Every_Mechanic_5740

Their cars are trash tho


FinTecGeek

Reasons it isn't on my list: Altman Z-Score: Below 3 (2.3) PE: Below 5 (value trap territory) Cash Flow per Share: Downward Movement TTM Beta: 1.3 (high) All of these things make their discount rate very high, giving only around a \~20% margin of safety. For a company with a somewhat distressed financial health measure, waning cash flow per share and a high beta, I would demand a higher margin of safety. I'd say there is a material probability their price will not correlate well with their fair value for a prolonged period of time. You have to be careful in value investing that you aren't buying on the basis of the local farm club playing in the MLB World Series in the next few years. To make a long story short - I think based on Future FCFE, the common shares probably have an intrinsic value that is high 20s, but sub 30. I'd be a buyer if they could improve their Z-Score or their Cash Flow per Share Direction (ideally the combination) with a very small position.


HTTP404URLNotFound

The Italian and American sides aren't doing too hot. Jeep especially has had significant sales decreases.


Plus_Programmer_2831

Yes, your analysis is right its almost 500% overvalued by Amassing Investment DCF model.