Fiat Chrysler is an automaker. I have been bullish on the automakers for some time. I have already looked at GM and Ford, favoring the former over the later. But, Fiat presents a different kind of opportunity. When you see their revenues and their earnings, there is an impressive move higher and higher with them. Earnings-per-share are a little on the slim side. However, when you consider revenue growth, there is real potential. Here is the total revenue, gross profits and earnings-per-share over the past three years.
2013: 86,816.0 5,582.0 0.74
2014: 96,090.0 6,073.0 0.47
2015: 110,595.0 7,832.0 0.22
As I mentioned, I am bullish on the auto industry. The economy in the United States is expanding, so much so that the Federal Reserve is in a protracted policy of raising interest rates up to normal levels. The normalization of interest rates will actually have a slight, negative factor to automakers. As interest rates increase the cost of a car for a consumer increases. For now, though, my expectation is that the industry is going to start pushing the selling of cars before this rates rise and make buying a car prohibitive. It makes sense. As consumers, we have seen how automakers push these vehicles when they need to. There will be the fair share of incentives and sales. My thinking is that this is going to have a very positive effect very soon on revenue for automakers.
Also, those increased sales will have the added effect of pushing the economy to expand even further. So, the economic engine will propel this company forward through the next several years.
The earnings-per-share over the past several years, on an average basis, have been trading at 15 times. Currently, FCAU’s stock is trading at $9 per share. Earnings for this year are projected to have cleared $1 per share, pushing this stock below the 10 times earnings that I am always seeking in a potential investment. With the low, discounted price, along with the added benefit of the continued earnings growth potential, and the ability for the company to increase its gross profits, there is the potential for this stock to accelerate upward. Already, since October, the stock moved from $6 per share to $9 per share, a 50% increase in just three months. That potential is going to outlive any selling we will see after the inauguration. I do expect the overall stock market to head lower over the course of the next several months now that the Republican celebration is over.
Along with the selling, I am putting in bids on certain stocks. I am looking at a very big picture with this vis-a-vis the potential of the overall economy to grow and EPS ratios to go more in line with what is average. Fiat Chrysler Auto Union has the ability to move much higher based on these two variables. You will want to be a little patient as the market positions itself properly. But, at the same time, you are buying a revenue stream at a deeply discounted price. So, the downside movements in this stock are limited to recent lows we saw just in October. That would be the baseline that I am eyeing up over the next several months.
You will want to consider this stock as an opportunity for your portfolio. There is a lot of potential with growth in the economy and industries. As I said, along with the economy I am bullish on the auto industry. And, given where you can buy this stock, I am bullish on Fiat Chrysler.