Aston Martin (LSE: AML) and Ferrari (NYSE: RACE) make some of the world’s most desirable luxury vehicles. While I can’t afford one of their supercars, I do own Ferrari shares in my Stocks and Shares ISA.
Here, I’ll look at which stock I’d pick right now if I had to choose between them.
Share price performance
As the chart below shows, the share prices have diverged radically over the past five years.
Aston Martin stock has been a horror show, plummeting around 94%. It was trading for £38 in November 2018 compared to £1.73 today. Ouch!
In contrast to this, the Ferrari share price has risen 204% over five years.
The reason for it is the stark difference in profitability, as evidenced by last year’s performance.
Ferrari
Aston Martin*
Vehicles sold
13,663
6,700
Revenue
€5.9bn
£1.6bn
Adjusted EBITDA
€2.2bn
£289m
Net profit/(loss)
€1.3bn
(-£221m)
*2023 forecast
Ferrari’s record 38.2% EBITDA profit margin makes it the world’s most profitable carmaker.
From its €932m of industrial free cash flow generated in 2023, Ferrari expects to dish out around €800m to shareholders in dividends and share buybacks. But Aston Martin isn’t yet profitable enough to do so.
Below are their mid-term financial targets.
Revenue
Adjusted EBITDA
Ferrari (2026)
€6.7bn
€2.5bn-€2.7bn
Aston Martin (2027/28)
£2.5bn
£800m
Ferrari is already confident of achieving the high end of this guidance and may yet beat it. Aston Martin is on track to reach its targets, but this isn’t certain.
James Bond and the Prancing Horse
Aston Martin will forever be associated with James Bond after the cars featured prominently in multiple films. The brand’s depiction is one of sophisticated taste and style.
Today, Aston Martin also has an F1 racing team, which is helping re-popularise the brand. Some 60% of customers are new to the brand across certain model ranges, according to management.
Meanwhile, Ferrari has existed for more than 70 years and released over 230 models (or ‘children’, as the Italian firm calls them).
Nowadays, a 21-year-old YouTube sensation is just as likely to want to own a ‘Rari’ as is a retired businessperson. Indeed, a third of new owners are under 40 while around 26% of buyers in China over the last five years were female, according to Bloomberg.
Clearly, the Prancing Horse has never been more popular and its appeal is truly global. This helps explain its booming lifestyle business, which now accounts for around 10% of group sales.
Seven-time world champion Lewis Hamilton is moving to its F1 team in 2025 and this should further boost the segment’s growth.
My pick
Ferrari’s superiority is reflected in its stock, which is trading at 46 times this year’s forecast earnings. So there’s potential risk buying at that very high valuation today.
Meanwhile, Aston Martin’s low price-to-sales (P/S) ratio of 0.95 and market cap of £1.43bn — around 40 times smaller than Ferrari’s — reflects uncertainty around its future. Reports say the firm is now hunting for its fourth CEO in four years.
That said, the stock offers more explosive growth potential if Aston can surpass its mid-term financial targets. But as a loss-making firm with net debt of around £800m, it’s higher-risk.
If I had to chose, I’d go with Ferrari stock long term for my ISA.
The post Would I buy Aston Martin or Ferrari shares for my Stocks and Shares ISA? appeared first on The Motley Fool UK.
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More reading
Should I buy Aston Martin shares as the FTSE 250 firm seeks a new CEO?
Ferrari’s up 45%! Should I invest more money in this top growth stock?
The Ferrari share price is surging! Should I buy the prancing horse’s stock?
Ben McPoland has positions in Ferrari. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
