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. Both the profitability and the financial health of HMC get a neutral evaluation. Nothing too spectacular is happening here. 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.
HMC had a positive operating cash flow in the past year.
HMC had positive earnings in each of the past 5 years.
HMC had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

With a decent Return On Assets value of 3.42%, HMC is doing good in the industry, outperforming 73.68% of the companies in the same industry.
HMC has a better Return On Equity (7.78%) than 73.68% of its industry peers.
HMC's Return On Invested Capital of 4.28% is fine compared to the rest of the industry. HMC outperforms 73.68% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for HMC 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

With a decent Profit Margin value of 4.84%, HMC is doing good in the industry, outperforming 78.95% of the companies in the same industry.
HMC's Profit Margin has declined in the last couple of years.
With a decent Operating Margin value of 5.79%, HMC is doing good in the industry, outperforming 76.32% of the companies in the same industry.
In the last couple of years the Operating Margin of HMC has declined.
HMC has a better Gross Margin (21.23%) than 81.58% of its industry peers.
HMC's Gross Margin has declined in the last couple of years.
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

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

2.2 Solvency

An Altman-Z score of 1.86 indicates that HMC is not a great score, but indicates only limited risk for bankruptcy at the moment.
HMC has a better Altman-Z score (1.86) than 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.
The Debt to FCF ratio of HMC (28.64) is better than 78.95% of its industry peers.
A Debt/Equity ratio of 0.45 indicates that HMC is not too dependend on debt financing.
HMC's Debt to Equity ratio of 0.45 is in line compared to the rest of the industry. HMC outperforms 42.11% of its industry peers.
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

The Earnings Per Share has grown by an impressive 43.86% over the past year.
Measured over the past years, HMC shows a very negative growth in Earnings Per Share. The EPS has been decreasing by -25.39% on average per year.
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

Based on estimates for the next years, HMC will show a quite strong growth in Earnings Per Share. The EPS will grow by 19.12% on average per year.
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

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

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9

4. Valuation

4.1 Price/Earnings Ratio

With a Price/Earnings ratio of 8.72, the valuation of HMC can be described as very reasonable.
Based on the Price/Earnings ratio, HMC is valued cheaply inside the industry as 86.84% of the companies are valued more expensively.
Compared to an average S&P500 Price/Earnings ratio of 24.92, HMC is valued rather cheaply.
The Price/Forward Earnings ratio is 7.91, which indicates a rather cheap valuation of HMC.
Compared to the rest of the industry, the Price/Forward Earnings ratio of HMC indicates a rather cheap valuation: HMC is cheaper than 92.11% of the companies listed in the same industry.
When comparing the Price/Forward Earnings ratio of HMC to the average of the S&P500 Index (21.49), we can say HMC is valued rather cheaply.
Industry RankSector Rank
PE 8.72
Fwd PE 7.91

4.2 Price Multiples

92.11% of the companies in the same industry are more expensive than HMC, based on the Enterprise Value to EBITDA ratio.
HMC's Price/Free Cash Flow ratio is rather cheap when compared to the industry. HMC is cheaper than 84.21% of the companies in the same industry.
Industry RankSector Rank
P/FCF 26.43
EV/EBITDA 6.78

4.3 Compensation for Growth

The 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.
A more expensive valuation may be justified as HMC's earnings are expected to grow with 19.12% in the coming years.
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.
HMC's Dividend Yield is rather good when compared to the industry average which is at 2.94. HMC pays more dividend than 100.00% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.41, 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

HMC pays out 25.79% of its income as dividend. This is a sustainable payout ratio.
DP25.79%
EPS Next 2Y26.86%
EPS Next 3Y19.12%

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