This Stock is Already Up Over 75% in 2012, Do You Own It?

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Delphi Automotive (NYSE: DLPH) is a vehicle components manufacturer that provides electrical and thermal technology for autos. Although Delphi is already up over 75% year to date, we still see room for growth in 2013.

Delphi's 3Q EPS results came in at $0.84 versus $0.72 for 3Q 2011. Strong future performance is expected to come from its recent Marvell Technology acquisition. The auto company plans to spend $250 million in restructuring costs to integrate Marvell, but the savings will be upwards of $80 million for 2013 alone. Billionaire John Paulson is one of Delphi's biggest investors, owning over 25 million shares (check out John Paulson's picks).

The chief fundamental driver for the company will be a rise in auto sales. The current average age of vehicles on the road is pushing eleven years. Additionally, Marvell's pre-synergistic EBITDA contribution of $130 million, which is expected to add $0.22 to 2013 EPS, will help out in the short term.

From a valuation standpoint, Delphi is one of the cheapest stocks in the industry at only 8x forward earnings and 7x cash flow. It is hard to see why the auto parts company trades at a such a discount to its peers when it leads in so many areas - including return on equity (60%), 5-year expected EPS growth (18% CAGR) and EBITDA margin (14%). Placing the peer average forward P/E (11x) on Delphi's 2013 EPS estimates suggests upside of 25% over the next 12 months.

Notable competitor Visteon (NYSE: VC) supplies climate control and lighting systems for use in autos. The company is on the high-end of the industry's valuation spectrum at 80x earnings. We tend to agree with many hedge fund investors that Visteon could unlock shareholder value by spinning off its non-core assets and focusing on its climate control business. Following a 40% stake increase, Visteon now calls billionaire Steven Cohen as one of its top investors.

Who's the best of the rest?

Autoliv (NYSE: ALV) focuses on auto safety components and is one of the few auto parts companies paying a dividend - yielding 3%. 3Q earnings results for Autoliv came in at $1.23 per share, which missed estimates of $1.45. The stock is still up 25% year to date, but trades above Delphi at 12x earnings. Although the stock does pay a solid dividend, its growth is the lowest of the five stocks listed at only a 2% long-term expected earnings CAGR. Billionaire Jim Simons dumped over 60% of his Autoliv shares last quarter (check out Jim Simons' top picks).

Johnson Controls (NYSE: JCI) is relatively flat year to date and makes temperature regulation systems for buildings. Johnson recently upped its 2013 outlook based on global expansion. Johnson now expects EPS to come in up 0.5-4% higher next year. This should also help drive the temperature company's robust 11% 5-year expected EPS growth.

Lear (NYSE: LEA) also trades on the cheap end of the industry and has the lowest debt position, with a 9% debt to equity ratio. Lear is a manufacturer of seat and electrical systems for autos. The seat-maker is up over 7% this past week on expansion announcements, including a seat facility in the U.K. and a wiring factory in Morocco. Next to Delphi, Lear has the best return on equity at 20% and the cheapest P/E at 9x, but we still prefer Visteon as our No. 2 pick, given its breakup positioning. Ken Griffin upped his stake in Lear by 35% last quarter (check out Ken Griffin's newest picks here).

Essentially, we believe that Delphi is an industry leader that still has the potential to go higher in 2013. It appears many investors are hesitant to jump into the stock given its recent run-up, but there is no denying that shares are still cheap.

This article is written by Marshall Hargrave and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article.  The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Autoliv. 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!

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