Toyota Pulls Back into Pole Position

Daniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

After losing it previously to GM (NYSE: GM), Toyota (NYSE: TM) has now regained its number one position as the world’s largest carmaker. All in all, 2012 was an excellent year for the Japanese carmaker, and in fact represented a dramatic turnaround for the company, which delivered record sales for the year. In the most recent report Toyota announced a large rise in profits, as well as an improved forecast for this year. These numbers reaffirm Toyota’s tale of recovery, after suffering heavily from the 2011 tsunami and earthquake in northern Japan.

Carmaker Earnings

On Tuesday, Toyota announced their financial results for the nine-month period ended on Dec. 31, 2012. Net revenues for the period came in at 16.2 trillion yen, representing an increase of 26% compared to the same period a year ago. Net income increased spectacularly from 162.5 billion yen to 648.1 billion yen. The carmaker had an especially strong performance in the North American market, with vehicle sales totaling 1.865 million units up 596,587 units compared to the same period a year earlier. Building on these numbers, the company upwardly revised its financial forecast for 2013. Toyota now expects operating income of 1.15 trillion yen and net income of 860 billion yen, boosted among other factors by favorable exchange rates.

US carmakers have been delivering similarly strong sales figures lately boosted by improving US auto sales with several manufacturers reporting double-digit sales growth. Chrysler Group and General Motors both increased sales by 16% in January YoY and Ford sales were up an impressive 22%. GM’s gains were led by a huge 47% increase in Cadillac brand sales which was its best in 23 years. Ford (NYSE: F) has been doing particularly well with pickup sales, their F-series sales climbing 22% for the 18th consecutive month of sales increases.

Valuations and Metrics

Toyota Motors currently trades at 16.21x earnings and a forward P/E of 12.09x. Price to sales and price to book are both fairly low at 0.57 and 1.14, respectively. The operating margin is fairly decent at around 6% and return on equity is all right, though not particularly impressive, at about 8%. The PEG ratio is worth mentioning as it is only .35. The company has almost $40 billion in cash, and almost $150 billion in total debt. Key US competitors Ford and GM both look cheaper based on TTM P/E at 9.05x and 10.5x, respectively. It may be worth mentioning that GM has a price to sales of only 0.29.

Bottom Line

After suffering from the 2011 natural disaster that rocked Japanese manufacturing, Toyota seems to have rebounded strongly. The company is selling a huge amount of vehicles and is delivering excellent profits, supported among other factors by a weak yen and the recovery in the US auto market. While Toyota is valued higher at the moment than its US counterparts, who are also doing very well in terms of sales, it may also be able to deliver higher growth in the years to come.  

 


DUJames is long Ford and has no position in any other stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus