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

HMC gets a fundamental rating of 6 out of 10. The analysis compared the fundamentals against 40 industry peers in the Automobiles industry. HMC has an average financial health and profitability rating. 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.
Each year in the past 5 years HMC has been profitable.
HMC had a positive operating cash flow in each of the past 5 years.

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 71.79% of the companies in the same industry.
HMC's Return On Equity of 7.78% is fine compared to the rest of the industry. HMC outperforms 71.79% 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 71.79% of the companies in the same industry.
Measured over the past 3 years, the Average Return On Invested Capital for HMC is significantly below the industry average of 12.29%.
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 76.92% 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 74.36% of the companies in the same industry.
HMC's Operating Margin has declined in the last couple of years.
HMC's Gross Margin of 21.23% is fine compared to the rest of the industry. HMC outperforms 79.49% 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

The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so HMC 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.
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 66.67% 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.
HMC has a Debt to FCF ratio of 28.64. This is in the better half of the industry: HMC outperforms 76.92% of its industry peers.
HMC has a Debt/Equity ratio of 0.45. This is a healthy value indicating a solid balance between debt and equity.
With a Debt to Equity ratio value of 0.45, HMC perfoms like the industry average, outperforming 43.59% 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
WACC7.16%

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 of 1.45. This is comparable to the rest of the industry: HMC outperforms 46.15% 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 in line with its industry peers.
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.
The earnings per share for HMC have been decreasing by -25.39% on average. This is quite bad
Looking at the last year, HMC shows a quite strong growth in Revenue. The Revenue has grown by 18.20% in the last year.
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.
The Revenue is expected to grow by 8.04% on average over the next years. This is quite good.
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

The Price/Earnings ratio is 8.83, which indicates a very decent valuation of HMC.
87.18% of the companies in the same industry are more expensive than HMC, based on the Price/Earnings ratio.
HMC is valuated cheaply when we compare the Price/Earnings ratio to 25.02, which is the current average of the S&P500 Index.
Based on the Price/Forward Earnings ratio of 8.00, the valuation of HMC can be described as reasonable.
Based on the Price/Forward Earnings ratio, HMC is valued cheaper than 92.31% of the companies in the same industry.
The average S&P500 Price/Forward Earnings ratio is at 21.32. HMC is valued rather cheaply when compared to this.
Industry RankSector Rank
PE 8.83
Fwd PE 8

4.2 Price Multiples

94.87% 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 82.05% of the companies in the same industry.
Industry RankSector Rank
P/FCF 26.75
EV/EBITDA 6.86

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 6.64%, which is a nice return.
Compared to an average industry Dividend Yield of 2.94, 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 2.40, 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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