Talking Numbers

Forget Ford and GM. This automaker looks downright 'cheap'

Talking Numbers

Forget Ford and GM. This automaker looks downright 'cheap'

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Forget Ford and GM. This automaker looks downright 'cheap'

Forget Ford and GM. This automaker looks downright 'cheap'
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GM CEO testifies on Capitol Hill

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Auto sales are revving up, and according to one very large fund manager there’s one automaker’s stock that could do particularly well in the near future.

The month of August saw auto sales zoom past what analysts were expecting. The industry saw an annualized rate of 17.53 million vehicles versus 16.09 million last year, making it the best sales rate since 2006.

(Read: Aug. auto sales rate hits 17.53M, best since 2006)

Erin Gibbs, who as equity chief investment officer at S&P Capital IQ Global Markets Intelligence manages $12 billion in assets, believes there are several things working in favor of the auto industry that will help it continue to grow.

“We see growth coming from really attractive new vehicles coming on the market,” said Gibbs. “There’s ample credit. We have an aging auto population in the U.S. And gas prices are relatively stable.”

Of all the publicly traded automakers out there, Gibbs likes Toyota the most and holds it in several of her firm's model porfolios. In August, the carmaker sold 246,100 vehicles—about 6.3 percent higher than last year and about 20,000 more than estimates.

Gibbs says despite a strong run in the stock, Toyota’s valuation remains “attractive” compared with its peers and that the weaker yen should provide a boost to the automaker’s bottom-line.

Company

Forward Price/Earnings

Ford

13.3x

General Motors

12.8x

Honda

10.0x

Toyota

9.1x

She also likes its growth prospects. “We’re looking at about 8 to 10 percent EPS [earnings per share] growth for next year and 13 percent growth for the following year,” Gibbs said.

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Jason Rotman, managing partner at Lido Isle Advisors, is also enthusiastic about Toyota based on its technicals. In Toyota’s charts, he sees something particularly interesting. Projecting a supporting uptrend from two lows made in the fall of 2012 also hits this year’s lows, just under $105 per share. Sure enough, that corresponds to a 50 percent retracement of Toyota’s 2012/2013 rally.

“The magic and mystery of technical analysis is that sometimes things really do line up,” Rotman said. “As long as Toyota is above that multiyear supportive trend line, I think every dip is going to be bought.”

(See: CNBC's Autos coverage)

Rotman maintains that the $105 level is crucial. “As long as we’re above $105, we need to get above $119 to $120 and then it’s off to the races,” he said. “We had a $60 rally in 2012 to 2013. If we mirror that rally and you add $60 from the low of this year, you get a $165 price target.

To see the full discussion on Toyota, with Gibbs on the fundamentals and Rotman on the technicals, watch the above video.

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