Is Honda Motors Undervalued?

-12.84%
Downside
37.23
Market
32.45
Trefis
HMC: Honda Motor logo
HMC
Honda Motor

Yes, Honda Motor Co. (NYSE: HMC) looks undervalued. As per Trefis, the price estimate of Honda Motors’s stock is $37, which is higher than its current market price.

Honda Motors, a Japanese Automotive company develops, manufactures, and markets motorcycles, automobiles, and life creation (power products) globally. Honda’s Q2 2020 (ended September 2019) results came on 8th November 2019. Total Revenue was recorded at around $35.2 billion while earnings were recorded around $1.10 for the quarter.

Trefis has a price estimate of $37 for Honda’s stock. We have detailed the key components of Honda Motors’ Valuation in an interactive dashboard, Honda Motors Valuation: Cheap or Expensive? along with our forecast for the full year 2020.

Relevant Articles
  1. Growth Of Chinese EV Players A Looming Threat For Honda Stock?
  2. What’s Happening With Honda Stock?
  3. Honda Stock Looks Like A Buy Following Strong Q3 Results
  4. Is Honda Stock A Buy As Motorcycle Business Shines?
  5. Is Honda Stock A Buy At $27?
  6. Forecast Of The Day: Average Price of Honda Vehicles

 

#1 Estimating Honda’s Revenues

  • Total Revenue has seen a continuous positive growth over the years. It increased from $129.6 billion in FY 2017 to $143.1 billion in FY 2019. Trefis estimates FY 2020 revenue to be around $147.2 billion.
  • Automotive Revenue has increased continuously over the years as sales volume has shown good growth. It increased from $93.4 billion in FY 2017 to $99.7 billion in FY 2019. Trefis estimates FY 2020 revenue to be around $102.8 billion.
  • Motorcycle Revenue has increased continuously over the years as sales volume has shown good growth. It increased from $15.9 billion in FY 2017 to $18.9 billion in FY 2019. Trefis estimates FY 2020 revenue to be around $20.1 billion.
  • Life Creation Revenue has increased continuously over the years as pricing has shown good growth. It increased from $2.9 billion in FY 2017 to $3.2 billion in FY 2019. Trefis estimates FY 2020 revenue to be around $3.3 billion
  • Financial Services revenue has grown as the interest rate went up. It increased from $17.4 billion in FY 2017 to $21.3 billion in FY 2019. Trefis estimates FY 2020 revenue to be around $21.1 billion.

#2 Estimating Honda’s Net Income

  • Indirect expenses for FY 2018 were down due to income tax benefit in that year of $0.12 billion. In FY 2020 we expect the Taxes to be stable and indirect expenses to be around $23.6 billion. For more details regarding Gross Margins of departments please check our interactive dashboard Honda Motors Valuation

#3 Deriving Honda’s EPS Figure

  • Honda has regularly invested in share repurchases to boost shareholder returns. Shares outstanding are likely to be around 1.76 million at the end of FY 2020.
  • This would enable it to report an EPS figure of $3.72 in 2020.

#4 Estimating Honda’s Share Price using P/E multiple

  • We expect Honda to achieve earnings of $3.72, which coupled with our P/E multiple of 9.9x works out to a price estimate of $37.

 

 

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Data

Like our charts? Explore example interactive dashboards and create your own.