On August 11, 2023, Aptiv PLC (APTV, Financial) registered a day's change of -4.75%, with a 3-month gain of 3.63% and an Earnings Per Share (EPS) (EPS) of 3.29. This article aims to answer the question: Is Aptiv PLC (APTV) modestly undervalued? We delve into the company's valuation analysis, presenting a comprehensive review of its financial strength, profitability, growth, and relative valuation.
Company Overview
Aptiv PLC's signal and power solutions segment supplies components and systems that make up a vehicle's electrical system, including wiring assemblies and harnesses, connectors, electrical centers, and hybrid electrical systems. The advanced safety and user experience segment provides body controls, infotainment and connectivity systems, passive and active safety electronics, advanced driver-assist technologies, and displays. Notably, Aptiv PLC's largest customers are General Motors and Stellantis, both contributing roughly 9% of 2022 revenue, followed by Ford and Volkswagen, both contributing 8%. North America and Europe represented approximately 37% and 31% of total 2022 revenue, respectively.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. The GF Value is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
At its current price of $98.28 per share and a market cap of $27.80 billion, Aptiv PLC (APTV, Financial) stock appears to be modestly undervalued according to the GuruFocus Value calculation. As Aptiv PLC is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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A Look at Aptiv PLC's Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are great indicators of a company's financial strength. Aptiv PLC has a cash-to-debt ratio of 0.19, which is worse than 75.48% of companies in the Vehicles & Parts industry. The overall financial strength of Aptiv PLC is 6 out of 10, indicating fair financial strength.
Profitability and Growth
Companies with consistent profitability over the long term offer less risk for investors. Aptiv PLC has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $19.30 billion and an EPS of $3.29. Its operating margin is 9.16%, which ranks better than 75.59% of companies in the Vehicles & Parts industry. Overall, the profitability of Aptiv PLC is ranked 8 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Aptiv PLC is 5%, which ranks worse than 52.53% of companies in the Vehicles & Parts industry. The 3-year average EBITDA growth is -2.3%, which ranks worse than 66.98% of companies in the Vehicles & Parts industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital (ROIC) and the weighted cost of capital (WACC). The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Aptiv PLC's ROIC is 11, and its cost of capital is 11.45.
Conclusion
In summary, the stock of Aptiv PLC (APTV, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks worse than 66.98% of companies in the Vehicles & Parts industry. To learn more about Aptiv PLC stock, you can check out its 30-Year Financials here.
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