Stock of the Day

September 23, 2020

Honda Motor (HMC)

$27.16
-$0.09 (-0.3%)
Market Cap: $42.52B

About Honda Motor

Honda Motor Co., Ltd. develops, manufactures, and distributes motorcycles, automobiles, power, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Power Product and Other Businesses. The Motorcycle Business segment produces motorcycles, including sports, business, and commuter models; and various off-road vehicles, such as all-terrain vehicles and side-by-sides. The Automobile Business segment offers passenger cars, light trucks, and mini vehicles. The Financial Services Business segment provides various financial services, including retail lending and leasing services to customers, as well as wholesale financing services to dealers. The Power Product and Other Businesses manufactures and sells power products, such as general purpose engines, lawn mowers, generators, water pumps, brush cutters, tillers, outboard marine engines, and snow throwers. This segment also offers HondaJet aircraft. The company also sells spare parts; and provides after-sale services through retail dealers directly, as well as through independent distributors and licensees. Honda Motor Co., Ltd. was founded in 1946 and is headquartered in Tokyo, Japan.

Honda Motor Bull Case

Here are some ways that investors could benefit from investing in Honda Motor Co., Ltd.:

  • Honda Motor Co., Ltd. recently reported earnings of $1.31 EPS, significantly exceeding analysts' expectations of $0.94 EPS by $0.37, indicating strong financial performance.
  • The company achieved a revenue of $36.31 billion for the quarter, surpassing the consensus estimate of $35.31 billion, showcasing robust sales growth.
  • With a current stock price of $28.71, Honda Motor Co., Ltd. has a price-to-earnings ratio of 7.09, which is considered low and may suggest that the stock is undervalued compared to its earnings.
  • The firm has a solid return on equity of 7.53%, reflecting effective management and the ability to generate profits from shareholders' equity.
  • Honda Motor Co., Ltd. has a market capitalization of $44.80 billion, indicating a stable and established presence in the automotive industry.

Honda Motor Bear Case

Investors should be bearish about investing in Honda Motor Co., Ltd. for these reasons:

  • The company's stock has a twelve-month high of $37.90 and a low of $23.41, indicating significant volatility which may pose risks for investors.
  • Honda Motor Co., Ltd. has a debt-to-equity ratio of 0.49, which, while not excessively high, suggests that the company does rely on debt financing to some extent, potentially increasing financial risk.
  • Recent analyst ratings have shown mixed sentiments, with UBS Group upgrading the stock to "neutral" but another firm downgrading it from "buy" to "hold," indicating uncertainty in future performance.
  • The company's beta of 0.58 suggests lower volatility compared to the market, but it may also indicate less potential for high returns, which could deter aggressive investors.
  • Despite recent earnings success, the automotive industry faces challenges such as supply chain disruptions and increasing competition, which could impact future profitability.

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