Arcimoto Inc (NASDAQ:FUV), a USD$27.58M small-cap, is an automobile company operating in an industry which is a major consumer of key commodities such as copper and steel, making the car manufacturers and suppliers significant players in the global economy. Upcoming challenges facing the sector is navigating the path from current automobile models to driverless cars, requiring high capital outlays in emerging technology. Shortcomings of well-established auto companies provides an opportunity for technology firms such as Alphabet and Apple to create their own software underlying autonomous and communication capabilities of automobiles. Automobile analysts are forecasting for the entire industry, a positive double-digit growth of 16 percent in the upcoming year, and a massive growth of 39 percent over the next couple of years. This rate is larger than the growth rate of the Australian stock market as a whole. Is now the right time to pick up some shares in automobile companies? Below, I will examine the sector growth prospects, as well as evaluate whether FUV is lagging or leading its competitors in the industry. View our latest analysis for Arcimoto
What’s the catalyst for FUV’s sector growth?
The growing presence in the auto industry of technology firms incontrovertible. These companies will likely prove to have an immense influence on the auto sector in the coming years, mainly because their skills and the industry’s needs align perfectly – they are proficient at seamlessly connecting components to create networks valued by consumers for the information, efficiencies, and experiences they deliver. FUV lags the pack with its negative growth rate of -42 percent over the past year, which indicates the company has been growing at a slower pace than its automobile peers. As the company trails the rest of the industry in terms of growth, FUV may also be a cheaper stock relative to its peers.
Is FUV and the sector relatively cheap?
The automobile industry is trading at a PE ratio of 16 times, lower than the rest of the Australian stock market PE of 22 times. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a lower 13 percent compared to the market’s 16 percent, illustrative of the recent sector upheaval. Since FUV’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge FUV’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? FUV has been an automobile industry laggard in the past year. If your initial investment thesis is around the growth prospects of FUV, there are other automobile companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how FUV fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If FUV has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its automobile peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at FUV’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Arcimoto’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other automobile stocks instead? Use our free playform to see my list of over 50 other automobile companies trading on the market.
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