The 3 Most Undervalued Manufacturing Stocks to Buy Now: August 2023
The manufacturing sector has been hit hard in recent years, manufacturing stocks are having quite a time.
The global pandemic precipitated incessant supply chain disruptions and forced many manufacturers to delay orders, resulting in lower revenues and margins.
In 2022, these supply chain disruptions coupled with elevated commodities prices increased global inflation to a point at which central banks around the world needed to react by raising interest rates.
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Fast forward to 2023, interest rate levels remain elevated, but inflation is falling and so is economic activity. Some companies have overcome these challenges and deliver strong financial performance and growth prospects.
In this article, we will look at three undervalued manufacturing stocks that equity investors should buy in August.
Hyundai Motor Company (HYMTF)
Source: shutterstock.com/AntonovVitalii
Hyundai Motor Company (OTCPK:HYMTF) is a South Korean automaker that manufactures and sells passenger cars, commercial vehicles, and electric vehicles.
The automaker has a diversified portfolio of brands, including Hyundai, Kia, Genesis, and IONIQ. Hyundai reported impressive global sales results for 2022, despite the challenging business environment.
The company sold 3.94 million vehicles in 2022, up 1.4% year-over-year. Its overseas sales increased 2.9% to 3.26 million units, thanks to the strong demand for its flagship and new models.
Overall, the company reported revenue of KRW 142.53 trillion (about $113 billion), up 14.8% year-over-year, and its net income rose 41% to KRW 7.08 trillion (approximately $3.8 billion). The company achieved revenue growth and gross margin expansion across all regions, as well as EPS growth of 40%.
The company also accelerated its transition to electrification, selling over 100,000 units of its IONIQ 5 and IONIQ 6 models in 2022.
In 2023, Hyundai aims to sell 4.32 million vehicles globally, with a focus on expanding its market share and operating profitability-oriented businesses.
The company plans to launch new models such as the all-new KONA, SANTA FE, and IONIQ 5 N, as well as solidify its leadership in the eco-friendly mobility market.
Hyundai’s stock is currently up nearly 24% year-to-date, but valuation remains cheap. The stock has a forward price-to-earnings (P/E) ratio of 4.7x forward earnings, which undervalued when compared to peers like Tesla (NASDAQ:TSLA), making it one of the manufacturing stocks to keep your eyes on.
Hollysys Automation Technologies (HOLI)
Source: shutterstock.com/A_B_C
Hollysys Automation Technologies (NASDAQ:HOLI) is a China-based company that provides automation and control solutions for various industries, such as railway, industrial, nuclear power, and subway.
The company’s products and services include distributed control systems, programmable logic controllers, train control centers, signaling systems, robotic systems, and cloud-based platforms.
Hollysys faced some headwinds in its recent fiscal year 2022 due to the slowdown in China’s economy, the trade tensions with the US, and the lockdowns related to the COVID-19 outbreak.
However, the company managed to maintain its profitability and cash flow generation, as well as diversify its revenue sources and expand its customer base.
At the end of their fiscal year 2023 (ended June 30), Hollysys reported revenue of $777 million, up nearly 10% year-over-year but nowhere near the double0digit growth numbers seen in prior fiscal years.
However, EBITDA margins were just above 13%, higher than the prior fiscal year. Net income margins also came higher than the prior fiscal year at nearly 14%.
China’s economic slowdown persists but will improve as the global economy recovers. In the meantime, Hollysys’ shares are only trading at a forward P/E ratio of 9.4x forward earnings, which provides patient investors with an opportunity to invest in relatively cheap shares.
Foxconn Technology (FXCOF)
Source: shutterstock.com/ZinetroN
Foxconn Technology (OTCPK:FXCOF) is a Taiwan-based company that provides contract manufacturing services for various electronics products, such as smartphones, tablets, laptops, TVs, servers, and automotive components.
The company is best known for being the main supplier of Apple’s (NASDAQ:AAPL) iPhones and iPads. Similar to Hollysys, Foxconn faced some challenges in 2022 due to what was occurring in the overall macro environment, namely the global chip shortage and covid-related lockdowns in China.
However, the company was able to mitigate some of these risks by increasing its production capacity in other regions, such as India, Vietnam, and Mexico.
Foxconn reported revenue of NT$6.6 trillion for 2022, up 11% year-over-year, and gross margins were slightly above 6.0%. Its net income was NT$141 billion, up 2.0% year-over-year.
In 2023, Foxconn expects revenue growth to be somewhat flat, driven softening demand for consumer electronics, but the company does see strong demand for cloud network and AI servers.
Foxconn’s stock is currently trading at only 4.0x forward EBITDA. While demand for manufacturing may be down, the company’s wide reach and relatively cheap valuation should get equity investors interested.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.
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