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Aptiv (APTV) has been on investors’ radar after recent share price moves, with a 1 day return of 1.3% and a month gain of about 2.5%, while the past 3 months show a 2.8% decline.
See our latest analysis for Aptiv.
At a share price of $78.83, Aptiv’s recent 1 month share price return of 2.5% contrasts with a 2.8% decline over 3 months. The 1 year total shareholder return of 25.3% sits against weaker 3 and 5 year total shareholder returns, suggesting that shorter term momentum has strengthened after a tougher multi year period.
If Aptiv has you thinking about the wider auto space, it could be a good moment to scan other auto manufacturers that are moving on fresh themes in the sector.
With Aptiv trading at $78.83 and sitting on a 25.3% 1 year total return after tougher 3 and 5 year periods, the key question now is whether the shares are still undervalued or if the market already reflects expectations for future growth.
Aptiv’s widely followed narrative pegs fair value at about $100.81, comfortably above the recent $78.83 close, putting the focus squarely on growth and margins behind that gap.
Strong demand for Aptiv’s advanced electrical/electronic architectures (including high voltage and high speed data connectivity products), driven by the global shift toward electric vehicles and increasingly complex vehicle electrical systems, is supporting robust new business bookings and growth in content per vehicle, this is a positive catalyst for revenue growth and, as volume scales, for operating leverage and margins.
Curious what kind of earnings ramp, margin uplift, and future profit multiple are baked into that fair value gap, and how much relies on software heavy ADAS wins and EDS separation plans.
The most followed narrative uses a discount rate of 8.78% to bring future cash flows back to today and lands on a fair value estimate of $100.81 per share. Against the current $78.83 price, that implies a meaningful valuation gap tied to assumptions about earnings growth, profit margins and Aptiv’s shift toward higher value electronics and software heavy content.
Result: Fair Value of $100.81 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, this hinges on a smooth EDS separation and steady demand in key regions. Setbacks in either could quickly challenge that undervalued narrative.
Find out about the key risks to this Aptiv narrative.
While the SWS DCF model points to Aptiv trading 44.7% below estimated fair value, the current P/E of 57.7x is well above both the US Auto Components industry at 23.8x and peers at 29.4x, and above the fair ratio of 32.4x. That premium suggests less margin for error, so which signal do you give more weight to?
See what the numbers say about this price — find out in our valuation breakdown.
If you see the numbers differently or would rather test your own assumptions, you can build a personalized Aptiv thesis in just a few minutes starting with Do it your way.
A great starting point for your Aptiv research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.
If Aptiv is on your list, do not stop there. The next step is broadening your watchlist with other focused ideas that fit your style.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include APTV.
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