Cars that accelerate fast can often lose speed quickly too. That is true of luxury vehicle marque Aston Martin (LSE: AML) — and its stock market performance. Since July, the Aston Martin share price has more than halved.
Over a longer term view, things look even worse.
From its 2018 listing to now, the Aston Martin share price has collapsed by 93%.
But the company has a well-heeled customer base, high selling prices, and legendary brand. Its results this week showed revenues last year grew 18%, on wholesale volumes up 3%.
So not only are sales volumes growing (albeit fairly modestly), the company’s pricing power is enabling it to increase revenues faster than volumes.
The shares continue to attract a lot of attention from investors, as trading volumes show.
Created at TradingView
Should I invest?
Valuation concerns
My answer, quite simply, is no.
Although it has great assets, I do not like the business performance. It continues to be heavily loss-making as shown by its track record of negative earnings per share.
Created at TradingView
The loss before tax last year more than halved. That is progress in the right direction. But it was still £240m, which is a sizeable amount.
Nor can that just be put down to the cost of servicing the company’s costly debt pile. Even at the operating level (before such financial costs are factored in), the company recorded a loss of £111m.
Meanwhile, net debt last year actually went in the wrong direction. It grew by 6% and ended the year at £814m.
Servicing such a balance sheet is costly. The company paid over £2m per week on average in net cash interest payments.
Why I am not investing
The dramatic long-term decline in the Aston Martin share price may look scary. Then again, it could seem like a buying opportunity. After all, past performance is not necessarily an indication of what will happen in future. In some ways, the business currently has momentum.
But what puts me right off investing is the company’s financial performance. It continues to lose money and has a large debt load. For now that needs to be serviced, eating into cashflows. Longer term it will need to be paid off at some point.
The company is targeting “sustainably positive” free cash flow for 2027/28. Last year, though, free cash outflow was £360m, even more than the prior year’s £299m. In other words, nearly a million pounds a day more in cash is going out the door at Aston Martin than is coming in.
Can management fix the economics?
Possibly they can, by growing revenues, reducing costs, and reducing or eliminating the debt. That is a lot to do, however, and for now I reckon the indicators of progress are mixed. Losses and debt remain substantial. I have no plans to invest.
The post The Aston Martin share price has halved. Time to buy? appeared first on The Motley Fool UK.
Should you buy Aston Martin now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
Could this growth stock be a buy after more than halving it losses?
Would I buy Aston Martin or Ferrari shares for my Stocks and Shares ISA?
Should I buy Aston Martin shares as the FTSE 250 firm seeks a new CEO?
C Ruane has no position in any of the shares mentioned. 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.
