Decent Value Stocks. Analyze the stocks with a good fundamental valuation, while still showing decent profitability, health and growth.


HONDA MOTOR CO LTD-SPONS ADR

New York Stock Exchange, Inc. / Consumer Discretionary / Automobiles

Fundamental Rating

6

We assign a fundamental rating of 6 out of 10 to HMC. HMC was compared to 40 industry peers in the Automobiles industry. HMC has only an average score on both its financial health and profitability. A decent growth rate in combination with a cheap valuation! Better keep an eye on HMC. These ratings could make HMC a good candidate for value investing.



6

1. Profitability

1.1 Basic Checks

In the past year HMC was profitable.
In the past year HMC had a positive cash flow from operations.
In the past 5 years HMC has always been profitable.
Each year in the past 5 years HMC had a positive operating cash flow.

1.2 Ratios

HMC's Return On Assets of 3.42% is fine compared to the rest of the industry. HMC outperforms 73.68% of its industry peers.
HMC has a Return On Equity of 7.78%. This is in the better half of the industry: HMC outperforms 73.68% of its industry peers.
Looking at the Return On Invested Capital, with a value of 4.28%, HMC is in the better half of the industry, outperforming 73.68% of the companies in the same industry.
HMC had an Average Return On Invested Capital over the past 3 years of 3.16%. This is significantly below the industry average of 9.50%.
The last Return On Invested Capital (4.28%) for HMC is above the 3 year average (3.16%), which is a sign of increasing profitability.
Industry RankSector Rank
ROA 3.42%
ROE 7.78%
ROIC 4.28%
ROA(3y)2.86%
ROA(5y)2.76%
ROE(3y)6.6%
ROE(5y)6.58%
ROIC(3y)3.16%
ROIC(5y)3.19%

1.3 Margins

Looking at the Profit Margin, with a value of 4.84%, HMC is in the better half of the industry, outperforming 78.95% of the companies in the same industry.
In the last couple of years the Profit Margin of HMC has declined.
The Operating Margin of HMC (5.79%) is better than 76.32% of its industry peers.
HMC's Operating Margin has declined in the last couple of years.
HMC has a better Gross Margin (21.23%) than 81.58% of its industry peers.
In the last couple of years the Gross Margin of HMC has declined.
Industry RankSector Rank
OM 5.79%
PM (TTM) 4.84%
GM 21.23%
OM growth 3Y2.86%
OM growth 5Y-3.18%
PM growth 3Y8.07%
PM growth 5Y-10.99%
GM growth 3Y-1.51%
GM growth 5Y-2.07%

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5

2. Health

2.1 Basic Checks

With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), HMC is destroying value.
HMC has less shares outstanding than it did 1 year ago.
The number of shares outstanding for HMC has been increased compared to 5 years ago.
The debt/assets ratio for HMC has been reduced compared to a year ago.

2.2 Solvency

HMC has an Altman-Z score of 1.86. This is not the best score and indicates that HMC is in the grey zone with still only limited risk for bankruptcy at the moment.
HMC's Altman-Z score of 1.86 is fine compared to the rest of the industry. HMC outperforms 68.42% of its industry peers.
The Debt to FCF ratio of HMC is 28.64, which is on the high side as it means it would take HMC, 28.64 years of fcf income to pay off all of its debts.
Looking at the Debt to FCF ratio, with a value of 28.64, HMC is in the better half of the industry, outperforming 78.95% of the companies in the same industry.
HMC has a Debt/Equity ratio of 0.45. This is a healthy value indicating a solid balance between debt and equity.
Looking at the Debt to Equity ratio, with a value of 0.45, HMC is in line with its industry, outperforming 42.11% of the companies in the same industry.
Industry RankSector Rank
Debt/Equity 0.45
Debt/FCF 28.64
Altman-Z 1.86
ROIC/WACC0.6
WACC7.15%

2.3 Liquidity

A Current Ratio of 1.45 indicates that HMC should not have too much problems paying its short term obligations.
HMC's Current ratio of 1.45 is in line compared to the rest of the industry. HMC outperforms 47.37% of its industry peers.
A Quick Ratio of 1.13 indicates that HMC should not have too much problems paying its short term obligations.
HMC has a Quick ratio (1.13) which is comparable to the rest of the industry.
Industry RankSector Rank
Current Ratio 1.45
Quick Ratio 1.13

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6

3. Growth

3.1 Past

HMC shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 43.86%, which is quite impressive.
HMC shows a very negative growth in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -25.39% yearly.
HMC shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 18.20%.
HMC shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 1.94% yearly.
EPS 1Y (TTM)43.86%
EPS 3Y-19.32%
EPS 5Y-25.39%
EPS growth Q2Q8.42%
Revenue 1Y (TTM)18.2%
Revenue growth 3Y4.23%
Revenue growth 5Y1.94%
Revenue growth Q2Q21.45%

3.2 Future

HMC is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 19.12% yearly.
HMC is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 8.04% yearly.
EPS Next Y52.91%
EPS Next 2Y26.86%
EPS Next 3Y19.12%
EPS Next 5YN/A
Revenue Next Year18.5%
Revenue Next 2Y10.74%
Revenue Next 3Y8.04%
Revenue Next 5YN/A

3.3 Evolution

When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.

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9

4. Valuation

4.1 Price/Earnings Ratio

A Price/Earnings ratio of 8.72 indicates a reasonable valuation of HMC.
Based on the Price/Earnings ratio, HMC is valued cheaper than 86.84% of the companies in the same industry.
HMC's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 24.92.
With a Price/Forward Earnings ratio of 7.91, the valuation of HMC can be described as very cheap.
HMC's Price/Forward Earnings ratio is rather cheap when compared to the industry. HMC is cheaper than 92.11% of the companies in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 21.49, HMC is valued rather cheaply.
Industry RankSector Rank
PE 8.72
Fwd PE 7.91

4.2 Price Multiples

Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of HMC indicates a rather cheap valuation: HMC is cheaper than 92.11% of the companies listed in the same industry.
Based on the Price/Free Cash Flow ratio, HMC is valued cheaply inside the industry as 84.21% of the companies are valued more expensively.
Industry RankSector Rank
P/FCF 26.43
EV/EBITDA 6.78

4.3 Compensation for Growth

HMC's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
HMC has a very decent profitability rating, which may justify a higher PE ratio.
HMC's earnings are expected to grow with 19.12% in the coming years. This may justify a more expensive valuation.
PEG (NY)0.16
PEG (5Y)N/A
EPS Next 2Y26.86%
EPS Next 3Y19.12%

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6

5. Dividend

5.1 Amount

HMC has a Yearly Dividend Yield of 6.64%, which is a nice return.
Compared to an average industry Dividend Yield of 2.86, HMC pays a better dividend. On top of this HMC pays more dividend than 100.00% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.43, HMC pays a better dividend.
Industry RankSector Rank
Dividend Yield 6.64%

5.2 History

The dividend of HMC decreases each year by -15.40%.
HMC has paid a dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)-15.4%
Div Incr Years0
Div Non Decr Years0

5.3 Sustainability

25.79% of the earnings are spent on dividend by HMC. This is a low number and sustainable payout ratio.
DP25.79%
EPS Next 2Y26.86%
EPS Next 3Y19.12%

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