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. 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 would make HMC suitable for value investing!



6

1. Profitability

1.1 Basic Checks

HMC had positive earnings in the past year.
In the past year HMC had a positive cash flow from operations.
HMC had positive earnings in each of the past 5 years.
In the past 5 years HMC always reported a positive cash flow from operatings.

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.
HMC has a Return On Invested Capital of 4.28%. This is in the better half of the industry: HMC outperforms 71.79% 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 12.26%.
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

HMC has a Profit Margin of 4.84%. This is in the better half of the industry: HMC outperforms 76.92% of its industry peers.
HMC's Profit Margin has declined in the last couple of years.
Looking at the Operating Margin, with a value of 5.79%, HMC is in the better half of the industry, outperforming 74.36% of the companies in the same industry.
HMC's Operating Margin has declined in the last couple of years.
The Gross Margin of HMC (21.23%) is better than 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

With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), 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

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.
With a decent Altman-Z score value of 1.86, HMC is doing good in the industry, outperforming 64.10% 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.
Looking at the Debt to FCF ratio, with a value of 28.64, HMC is in the better half of the industry, outperforming 79.49% of the companies in the same industry.
A Debt/Equity ratio of 0.45 indicates that HMC is not too dependend on debt financing.
Looking at the Debt to Equity ratio, with a value of 0.45, HMC is in line with its industry, 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
WACC7.14%

2.3 Liquidity

A Current Ratio of 1.45 indicates that HMC should not have too much problems paying its short term obligations.
With a Current ratio value of 1.45, HMC perfoms like the industry average, outperforming 46.15% of the companies in the same industry.
A Quick Ratio of 1.13 indicates that HMC should not have too much problems paying its short term obligations.
Looking at the Quick ratio, with a value of 1.13, HMC is in line with its industry, outperforming 53.85% of the companies in the same 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.
HMC shows a very negative growth in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -25.39% yearly.
Looking at the last year, HMC shows a quite strong growth in Revenue. The Revenue has grown by 18.20% in the last year.
Measured over the past years, HMC shows a small growth in Revenue. The Revenue has been growing by 1.94% on average per year.
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.
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

Based on the Price/Earnings ratio of 8.87, the valuation of HMC can be described as reasonable.
HMC's Price/Earnings ratio is rather cheap when compared to the industry. HMC is cheaper than 87.18% of the companies in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 28.28, HMC is valued rather cheaply.
A Price/Forward Earnings ratio of 8.04 indicates a reasonable 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 92.31% of the companies listed in the same industry.
HMC is valuated cheaply when we compare the Price/Forward Earnings ratio to 20.88, which is the current average of the S&P500 Index.
Industry RankSector Rank
PE 8.87
Fwd PE 8.04

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.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of HMC indicates a rather cheap valuation: HMC is cheaper than 82.05% of the companies listed in the same industry.
Industry RankSector Rank
P/FCF 26.88
EV/EBITDA 6.85

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.
The decent profitability rating of HMC 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)0.17
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 3.17, HMC pays a better dividend. On top of this HMC pays more dividend than 97.44% of the companies listed 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 been paying a dividend for at least 10 years, so it has 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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