3 Auto Manufacturing Stocks To Buy Instead Of Tesla

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Electric Vehicle (EV) giant Tesla, Inc. (TSLA - Get Rating) has had a remarkable run in 2020; the stock gained 537.3% over the past year. This was driven mainly by the increased demand for EVs as governments around the world took measures to cut automobile greenhouse gas emissions over the next few decades. The company was also added to the S&P 500 Index in December 2020.

However, TSLA’s low profitability has been a concern for some time, making the stock overvalued. In terms of non-GAAP forward p/e, TSLA’s 160.03x is 748.1% higher than the industry average 18.87x. In terms of forward price/sales, it is currently trading at 13.29x, which is 963.2% higher than the industry average 1.25x. The company also missed its consensus EPS estimate in the fourth quarter by 22.3%. And it is currently trading 25.8% below its 52-week high of $900.40.

Thus, we think investors should focus on relatively undervalued auto manufacturers that have the potential to perform better than TSLA in the near term. Daimler AG (DDAIF - Get Rating), Honda Motor Company, Ltd. (HMC - Get Rating), and Tata Motors Limited (TTM - Get Rating) are three such stocks.

Daimler AG (DDAIF - Get Rating)

Germany-based Daimler AG  is an automotive engineering company. It develops, produces, and distributes cars, trucks, and vans. The company operates through five segments — Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans, Daimler Buses, and Daimler Financial Services. DDAIF also sells vehicle-related spare parts and accessories.

The company’s Mercedes-EQ is expected to launch the all-electric luxury saloon EQS in a digital world premiere on the Mercedes me media online platform on April 15. On March 30, BP plc. (BP) joined forces with DDAIF in  Digital Charging Solutions GmbH (DCS) to further extend and significantly improve electrification by making EV charging more convenient, simpler, and seamless for drivers. The company also started selling its new Mercedes-Benz C-Class on that date. Also in March the Mercedes-AMG Petronas Formula One Team and Mercedes-EQ Formula E Team jointly announced TeamViewer as their new official partner.

For the fourth quarter ended December 31, 2020, the company’s unit sales increased 14.1% sequentially to 881,550 units. Mercedes-Benz Cars & Vans’ unit sales increased nearly 13% sequentially to 760,895 units. DDAIF’s revenue came in at €46.62 billion, which represents an improvement of 15.7% from its prior quarter. The company’s EBIT was  €4.60 billion, up 1100.5% year-over-year.  its EPS has increased 69.8% sequentially to €3.26.

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