For today’s stock spotlight, I’m heading overseas and looking at an automotive supplier that has the potential to offer something for both value and growth investors.
Many of you may know them for their tires…
Continental AG (CTTAY)
Continental is a $50B company in Germany that provides automotive supplies, involved in a number of markets including a large segment devoted to tires. CTTAY trades 11.4X Earnings, 6.3X EBITDA, and 2.6X Book with a 6% FCF yield and 1.3% dividend yield.
On the monthly chart (see below) shares are having a strong September and nearing a major bull flag breakout, a pattern that over the longer term measures to an upside target of $85. In 1H17the company posted 8% organic growth though EBIT down 2% from raw material cost burdens, a trailing ROCE of 19%.
CTTAY has peers like DLPH and ALV that each recently rose on decisions to spin-off parts of the business, and CTTAY could look to spin off its drivetrain system or merge with Delphi’s spin-off. In May, Continental signed a cooperation agreement with Baidu (BIDU) for automated driving, connected vehicles and intelligent mobility services. In closing, CTTAY is a value name positioned in a number of strong growth segments in the automotive industry, while also having plenty of optionality.
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The author does not have a position in the mentioned security at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.