April Insights Into Auto Stocks: AB Dynamics Plc (LON:ABDP)
AB Dynamics Plc (AIM:ABDP), a UK£166.73M small-cap, is an auto company operating in an industry whose long product cycles and deep capital outlays make planning ahead difficult. New growth opportunities in smart cars and software is not the traditional focus for most auto companies. Automobile analysts are forecasting for the entire industry, a positive double-digit growth of 16.54% in the upcoming year , and a robust short-term growth of 22.96% over the next couple of years. This rate is larger than the growth rate of the UK Below, I will examine the sector growth prospects, as well as evaluate whether AB Dynamics is lagging or leading its competitors in the industry. Check out our latest analysis for AB Dynamics
What’s the catalyst for AB Dynamics’s sector growth?
The increasing presence of tech firms in the auto industry cannot be overlooked or discounted by OEMs. In the next decade, software integration will likely have a significant impact on the auto industry, given the alignment of their expertise – they are adept to connecting value-add components to created networks for information, efficiencies and experiences. Over the past year, the industry saw growth in the forties, beating the UK market growth of 14.72%. AB Dynamics lags the pack with its negative growth rate of -6.37% over the past year, which indicates the company has been growing at a slower pace than its automobile peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 54.71% in the upcoming year.
Is AB Dynamics and the sector relatively cheap?
The automobile sector’s PE is currently hovering around 18.35x, relatively similar to the rest of the UK stock market PE of 16.8x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 13.61% on equities compared to the market’s 12.14%, potentially illustrative of a turnaround. On the stock-level, AB Dynamics is trading at a higher PE ratio of 41.28x, making it more expensive than the average automobile stock. In terms of returns, AB Dynamics generated 13.82% in the past year, in-line with its industry average.
Next Steps:
AB Dynamics’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If AB Dynamics has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other automobile companies. However, before you make a decision on the stock, I suggest you look at AB Dynamics’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has ABDP’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of AB Dynamics? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
