Tata Motors (TTM): Two killer numbers
By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 10/20/11
Despite my personal preference for growth stocks, there are times when an investor has to give a nod to reality.
In a market like this, great setups for growth stocks are thin on the ground, and some of the old leaders are springing leaks left and right.
So it’s a good time to get in touch with your inner value investor, and that’s what I’m doing with Tata Motors (TTM).
Tata Motors is an Indian car and truck builder that manufactures an astonishing variety of vehicles, from the Tata Nano, the world’s cheapest, fully enclosed four-passenger car, to Jaguars and Range Rovers. The company sold just over one million vehicles during its 2010-2011 fiscal year that ended in March. That’s up from 870,000 the previous year.
Q2 results extended the company’s string of quarters with double-digit revenue growth to seven, although earnings dipped a tad (down 3%) during the quarter. So this is a growing, solidly profitable company.
There are two killer numbers for TTM. The first is its P/E ratio of 6, which is absurdly low for a profitable manufacturer in a high-potential home market that also has significant overseas opportunities in its Jaguar and Range Rover lines.
The second number is 318, which is the number of institutional investors who are onboard with the stock. That number was 214 a year ago, and has increased steadily every quarter since the beginning of 2009.
Tata’s management has shown both its ambition in taking on two international prestige automotive lines and its competence in managing the integration of those brands.
After a drop from 38 in late 2010 to a sloppy triple bottom just below 15 last month, TTM isn’t a growth investor’s poster child. But for those with patience (and who appreciate the stock’s 2.2% forward annual dividend yield), TTM offers a solid opportunity.
You could buy TTM here and hope for the best or you could check out Cabot China & Emerging Markets Report, the top source for the best stocks in the world’s fastest-growing economies. The Report has been named one of the top-performing newsletters since its inception in 2004 and there’s a lot more where that great growth came from! Get started today!
1/17/11 Tata Motors (TTM): Shares are clearly undervalued
By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 1/17/10 Sign up for free Cabot Wealth Advisory e-newsletter
Tata Motors (TTM) is India’s leading automotive manufacturer, but also produces buses and tractor-trailers. The company took a big gamble when it purchased Jaguar/Land Rover two years ago. Investors dumped TTM shares knowing that Jaguar would bring substantial deficits to Tata. But the deficits didn’t last long, because Tata turned Jaguar around quickly.
For the 12 months ended 9/30/10, Tata’s earnings increased from a deficit of $2.16 per share to a profit of $3.31 per share. We expect forward 12-month EPS of 3.50 with future profitable years almost assured. Sales increased an impressive 58% during the past 12 months from a year ago. The company’s Nano mini-car is a big hit, and Jaguar sales are soaring. At 7.7 times our forward 12-month EPS estimate, TTM shares are clearly undervalued. The company pays an annual dividend yielding 1.2%.
Tata’s balance sheet is heavy with debt, but the company’s much improved cash flow should allow a quick pay-down of long- and short-term debt. In addition, the company raised $750 million in a secondary stock offering, which will be used to help lower its debt. The company is in a cyclical industry, and the volatile share price swings are not for the faint of heart, but I recommend buying TTM shares at the current price.
J. Royden Ward
Editor of Cabot Benjamin Graham Value Letter
A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of Cabot Benjamin Graham Value Letter
, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the Value Letter