Baseball, Apple Pie, and Fiat Chrysler?

Written by GSCR Staff   
Wednesday, 30 March 2016 06:47

In Monday’s Guide we turned somewhat pessimistic on the markets. While we did not mean to play Chicken Little, there are some signs that point to a downturn and investors need to be cautious. Today we will turn to the positive. On the sports side, Major League Baseball starts next week, one reason to be upbeat. Additionally, on Tuesday the Conference Board’s index of consumer confidence rose to 96.2 upwardly revised from 94. Does this mean a spending spree in store for the economy? One American tradition is increased car buying in the spring. This is where we are going today.

Below is the one year chart for Fiat Chrysler Automobiles N.V. (NYSE – FCAU - $7.82). It can be seen that the stock is now trading above the 50-day EMA on what appears to be a new momentum run from a low in the middle of February.

FCAU 1-Year, 50-Day EMA

(Source: www.otcmarkets.com)

MM.03.30.16.FCAU-1yr-50dayema

Our tagline today was a slight tongue-n-cheek comment. Fiat Chrysler is an automobile international conglomerate with some great Chrysler and Jeep brands but additionally house the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional trademarks. The Company operates on six continents and includes parts and services as well as aftermarket parts businesses.

The first comparison we like is to the U.S. automaker GM. Fiat is forecast for 300% EPS growth in 2016 over 2015 versus the GM forecast of 8-9% growth in EPS in 2016 over 2015. Fiat’s trailing P/E is 31 and the forward metric is 4.7 on revenue growth of 4.4% forecast to $115 billion in 2016. Finally, while we do not think Fiat will be an acquisition target, the Enterprise Value to EBITDA ratio is a really low 2.

Automotive stocks are now in play with the seasonal buying. FCAU is an outstanding undervalued small cap stock. We think the stock climbs back to $9 by the end of the summer.

Have a great day!

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