Toyota’s Valuation Is Extremely Sensitive To Its Automotive Division’s Gross Margin

-10.50%
Downside
234
Market
209
Trefis
TM: Toyota Motor logo
TM
Toyota Motor

Toyota (NYSE:TM)’s gross margins improved significantly in 2013, from 20.2% to 25.1%, following the yen devaluation. The trend continued through 2014 and 2015, with the gross margin ending at 26.5% in 2015. Revenues earned from overseas markets translated into more Yen. Once the effect of a weak Yen is discounted, the margins should stabilize from there on. A 30 basis point rate of growth per year over the rest of our forecast period could lead Toyota’s valuation to go up by as much as 18%. A 30 basis point decline in growth per year over the rest of our forecast period could lead Toyota’s valuation to go down by 14%.

tm gross margins

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1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Toyota Motor

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