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

Taking everything into account, HMC scores 6 out of 10 in our fundamental rating. 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. HMC may be a bit undervalued, certainly considering the very reasonable score on growth 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.
Each year in the past 5 years HMC has been profitable.
Each year in the past 5 years HMC had a positive operating cash flow.

1.2 Ratios

Looking at the Return On Assets, with a value of 3.42%, HMC is in the better half of 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.
The Return On Invested Capital of HMC (4.28%) is better than 73.68% of its industry peers.
HMC had an Average Return On Invested Capital over the past 3 years of 3.16%. This is significantly below the industry average of 9.59%.
The 3 year average ROIC (3.16%) for HMC is below the current ROIC(4.28%), indicating increased profibility in the last year.
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

HMC has a better Profit Margin (4.84%) than 78.95% of its industry peers.
In the last couple of years the Profit Margin of HMC has declined.
HMC's Operating Margin of 5.79% is fine compared to the rest of the industry. HMC outperforms 76.32% of its industry peers.
HMC's Operating Margin has declined in the last couple of years.
Looking at the Gross Margin, with a value of 21.23%, HMC belongs to the top of the industry, outperforming 81.58% of the companies in the same industry.
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

HMC has a Return on Invested Capital (ROIC), which is below the Cost of Capital (WACC), which means it is destroying value.
Compared to 1 year ago, HMC has less shares outstanding
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.
Looking at the Altman-Z score, with a value of 1.86, HMC is in the better half of the industry, outperforming 71.05% of the companies in the same industry.
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.
With a decent Debt to FCF ratio value of 28.64, HMC is doing good in the industry, outperforming 78.95% of the companies in the same industry.
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
WACC7.17%

2.3 Liquidity

A Current Ratio of 1.45 indicates that HMC should not have too much problems paying its short term obligations.
HMC has a Current ratio (1.45) which is comparable to the rest of the industry.
HMC has a Quick Ratio of 1.13. This is a normal value and indicates that HMC is financially healthy and should not expect problems in meeting its short term obligations.
The Quick ratio of HMC (1.13) 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%.
The Revenue has been growing slightly by 1.94% on average over the past years.
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

The Earnings Per Share is expected to grow by 19.12% on average over the next years. This is quite good.
Based on estimates for the next years, HMC will show a quite strong growth in Revenue. The Revenue will grow by 8.04% on average per year.
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.
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

The Price/Earnings ratio is 8.86, which indicates a very decent valuation of HMC.
86.84% of the companies in the same industry are more expensive than HMC, based on the Price/Earnings ratio.
When comparing the Price/Earnings ratio of HMC to the average of the S&P500 Index (24.95), we can say HMC is valued rather cheaply.
Based on the Price/Forward Earnings ratio of 8.03, the valuation of HMC can be described as reasonable.
92.11% of the companies in the same industry are more expensive than HMC, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of HMC to the average of the S&P500 Index (21.40), we can say HMC is valued rather cheaply.
Industry RankSector Rank
PE 8.86
Fwd PE 8.03

4.2 Price Multiples

Based on the Enterprise Value to EBITDA ratio, HMC is valued cheaper than 94.74% of the companies in the same industry.
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 26.83
EV/EBITDA 6.87

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)0.17
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 6.50%, which is a nice return.
HMC's Dividend Yield is rather good when compared to the industry average which is at 2.90. HMC pays more dividend than 100.00% of the companies in the same industry.
HMC's Dividend Yield is rather good when compared to the S&P500 average which is at 2.45.
Industry RankSector Rank
Dividend Yield 6.5%

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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