Are Investments in Volvo Stocks As Safe As Their Cars?

The Volvo brand has been known in the automotive market for almost 100 years since the first production car was released in 1927, which could reach a top speed of 56 mph. Over time, this brand has become associated in the minds of many car enthusiasts as the safest car on the planet thanks to marketing and real contributions to improving the safety of car use.

The challenge today is to find out whether investing in Volvo shares is as safe and whether it allows the portfolios to accelerate growth?

First, let’s figure out what stocks are available and where they are traded. The situation with Volvo is complicated by the fact that today the Swedish auto giant is actually divided into 2 companies.

Volvo AB or Volvo Group is the brand rights holder and manufacturer of commercial trucks, with assets such as Volvo Trucks and Renault Trucks. VOLV B shares are traded on the Nasdaq Stockholm Exchange in Swedish krones and VOLVF is trading on OTC.

The production of cars is under the control of Volvo Car AB. The company is headquartered in Goeteborg, but almost 78.7% belongs to another automobile company — Geely. The ticker VOLCAR B is also traded on the Swedish stock exchange, and the ticker VLVOF can be purchased on OTC as well.

The Eyestock Rating: We Delve Deep, So You Don’t Have To

Even though shares of the truck manufacturing business have grown by 70% in two years, and VOLCAR stocks price have fallen by half over the same period, thanks to our methodology for analyzing and assessing the company, we believe that greater investment potential is concentrated in the shares of the car manufacturer. Volvo Car AB rating scored 63 points, while like Volvo AB, only 38. Let us recall that an ideal company for investment should score a total of 100 points after analyzing such areas as financial performance, financial position, profitability and growth sustainability. Learn more about our methodology here.

Electric Future

The current market trend gives us the understanding that the future of the automotive industry lies in the field of electric vehicles, and in 2021 the company’s management is committed to becoming a leader in the fast-growing premium electric car market and plans to become a fully electric car company by 2030.

Therefore, when assessing the prospects for investing in Volvo, we must keep in mind the affairs of the main players in the market: Tesla, Li Auto, as well as Lucid Group and Rivian Automotive.

So, among the listed companies, Volvo Car has the third rating of 63 points, after the leader Tesla (87) and BYD Co (70). With this company in this company:
—2nd in financial performance indicators after BYD Co, trailing only 1 point and significantly ahead of Tesla. Here the indicators net profit margin and gross margin, as well as earnings quality, were taken into account.
—3rd in terms of financial position after Li Auto and Tesla, while only slightly inferior to the Eyestock benchmark after analyzing debt-to-equity, current and cash flow-to-debt ratios.
—2nd after Tesla in terms of shareholder return with return on equity (ROE) of 16%

Volvo is the cheapest stock in the industry today with a P/E valuation below 4, while TSLA has a P/E ratio of 46 and BYD trades at 21 annual earnings. The business’s growth rate, while unsustainable, is in line with its peers. It is also worth noting that Volvo’s rating according to the Eyestock methodology is underestimated relative to Tesla, since after the updated company’s IPO there is not enough data to assess the long-term sustainability of growth rate.

Conclusion

Competitive and profitable business equities have been falling in price for two years, while management announces quite ambitious and not groundless plans for the next 6 years. Right now, it looks like Volvo Car AB could be one of the industry’s most promising investments if the best-case scenario plays out.

Invest Wisely, Accelerate Growth