In a market where value is scarce, NYSE:HMC offers a refreshing opportunity with its solid fundamentals.

Last update: Apr 11, 2024

HONDA MOTOR CO LTD-SPONS ADR (NYSE:HMC) was identified as a decent value stock by our stock screener. NYSE:HMC scores well on profitability, solvency and liquidity. At the same time it seems to be priced very reasonably. We'll explore this a bit deeper below.

Assessing Valuation for NYSE:HMC

ChartMill assigns a proprietary Valuation Rating to each stock. The score is computed by evaluating various valuation aspects, like price to earnings and free cash flow, both absolutely as relative to the market and industry. NYSE:HMC was assigned a score of 9 for valuation:

A Price/Earnings ratio of 9.26 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.
When comparing the Price/Earnings ratio of HMC to the average of the S&P500 Index (25.83), we can say HMC is valued rather cheaply.
With a Price/Forward Earnings ratio of 8.63, the valuation of HMC can be described as very reasonable.
Compared to the rest of the industry, the Price/Forward Earnings ratio of HMC indicates a rather cheap valuation: HMC is cheaper than 89.47% 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 (22.17), we can say HMC is valued rather cheaply.
HMC's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. HMC is cheaper than 94.74% of the companies in the same industry.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of HMC indicates a rather cheap valuation: HMC is cheaper than 86.84% of the companies listed in the same industry.
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.
A more expensive valuation may be justified as HMC's earnings are expected to grow with 17.78% in the coming years.

A Closer Look at Profitability for NYSE:HMC

ChartMill employs its own Profitability Rating system for stock evaluation. This score, ranging from 0 to 10, is derived from an analysis of diverse profitability metrics and margins. In the case of NYSE:HMC, the assigned 6 is noteworthy for profitability:

The Return On Assets of HMC (3.42%) is better than 73.68% of its industry peers.
With a decent Return On Equity value of 7.78%, HMC is doing good in the industry, outperforming 73.68% of the companies in the same industry.
HMC has a better Return On Invested Capital (4.28%) than 73.68% of its industry peers.
The 3 year average ROIC (3.16%) for HMC is below the current ROIC(4.28%), indicating increased profibility in the last year.
HMC's Profit Margin of 4.84% is fine compared to the rest of the industry. HMC outperforms 78.95% of its industry peers.
HMC's Operating Margin of 5.79% is fine compared to the rest of the industry. HMC outperforms 76.32% of its industry peers.
With an excellent Gross Margin value of 21.23%, HMC belongs to the best of the industry, outperforming 81.58% of the companies in the same industry.

Analyzing Health Metrics

ChartMill employs a unique Health Rating system for all stocks. This rating, ranging from 0 to 10, is determined by analyzing various liquidity and solvency ratios. For NYSE:HMC, the assigned 5 for health provides valuable insights:

HMC has a Altman-Z score of 1.88. This is in the better half of the industry: HMC outperforms 71.05% of its industry peers.
HMC has a Debt to FCF ratio of 28.64. This is amongst the best in the industry. HMC outperforms 81.58% 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.

How We Gauge Growth for NYSE:HMC

ChartMill assigns a Growth Rating to every stock. This score ranges from 0 to 10 and evaluates the different growth aspects like EPS and Revenue, both in the past as in the future. NYSE:HMC scores a 5 out of 10:

The Earnings Per Share has grown by an impressive 43.86% over the past year.
HMC shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 18.20%.
Based on estimates for the next years, HMC will show a quite strong growth in Earnings Per Share. The EPS will grow by 17.78% on average per year.
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.

Every day, new Decent Value stocks can be found on ChartMill in our Decent Value screener.

Check the latest full fundamental report of HMC for a complete fundamental analysis.

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.