After a 57% increase from the march 23 minimum this year, at the current value of around $17 consistent with a consistent percentage, we believe that Volkswagen AG’s inventory (OTCMKTS: VWAGY) no longer has many advantages. Volkswagen’s inventory has increased from $11 to $17 in the recent fund, higher than the S-P, which has increased by about 45%. The increase in consistent percentage values was basically helped by the Fed’s multibillion-dollar stimulus package announced on March 23, which raised market confidence. The automotive sector faces short-term uncertainty due to declining demand, restrictions on prospective sources, and reduced discretionary spending. This would restrict any accumulation in the inventory until there is some clarity regarding the relief of the virus.
Inventory is lately 16% below the grades it had at the end of 2017 and is still below the pre-Covid peak (February 2020) of $19. We consider that the company’s inventories are not rising in the short term, due to the prospect of lower revenue and margins. Our dashboard “What points caused Volkswagen’s inventory to be replaced by -14% between 2017 and now?” It contains the underlying figures.
Some of the decrease in percentage costs in the 2017-2019 era was offset by 8% cash growth. Volkswagen’s cash increased from $261 billion in 2017 to $281 billion in 2019, basically due to the contribution of Volkswagen’s passenger segment, while Skoda recorded the most powerful growth. The company also recorded a 13% increase in net profit, with a net profit margin from 5% in 2017 to 5.3% in 2019.
The percentage value fell in this period, with multiple P/U falling from 8x in 2017 to 7x in 2019. The P/U has been reduced to approximately 6x now, given the volatility of the existing situation.
Effect of coronavirus
The global spread of coronavirus has led to the closure of several cities around the world, increasing commercial and economic activity. This is most likely because of negative intake and customer spending. Volkswagen’s inventory has fallen by about 7% since January 31, after the World Health Organization declared a global fitness emergency to prevent the spread of coronavirus. However, during the same period, the index remained stable. As a result of the coronavirus pandemic, the company recorded a 14% minimisation in overall revenue by the first quarter of 2020, with an observed decline in all segments. In addition, minimizing customer spend and entry in the coming months can lead to minimizing car demand, and customers focus more on basic expenses.
In the coming weeks, we expect continued improvement in the call and moderate expansion in the number of new Covid-19 instances in the United States to be in the market. Following the Fed’s encouragement, which helped lay the groundwork for concern, the market was willing to “analyze” the era of weakness and adopt a longer-term vision, with investors focusing on the 2021 results.
The slow opening of the lock has helped the Volskwagen P/E back to 6x at this time, but we do not expect any further improvement. According to Volkswagen’s assessment through Trefis, VWAGY’s estimated fair value is $17.
While Volkswagen doesn’t offer many short-term benefits for potential investors, is it possible that just making an investment in under debt companies, down but not out, will generate significant profits after Covid? Learn more in our analysis: The Leveraged 5: AAL, CTL, COTY, OXY, HOG.
For a better understanding of automotive space, see General Motors and Honda Motors Can A Covid Recession.
See all Trefis value estimates and download Trefis knowledge here
What is Trefis? Find out how this drives new collaborations and assumptions for CFOs and monetary groups Products, studies and marketing groups
Led by MIT engineers and Wall Street analysts, Trefis (via its dashboard platform dashboards.trefis.com) is helping you perceive how a company’s products, whether
Led by MIT engineers and Wall Street analysts, Trefis (via its dashboard platform dashboards.trefis.com) is helping you perceive how a company’s products, which touches, reads or listens daily to the value of its actions. Surprisingly, the founders of Trefis discovered that, with many others, they simply didn’t perceive the potential family corporations around them: Apple, Google, Coca Cola, Walmart, GE, Ford, Gap and others. This would possibly come with you, even if you have invested cash in those corporations, or have worked with one of them for years as an employee, or consulted them as an expert for a long time. You can play with hypotheses or check scenarios, as well as ask questions to other users and experts. The platform uses all the knowledge to show in a snapshot what drives the cost of a company’s business. Trefis is used lately through thousands of investors, corporate painters and professionals.