Toyota, Honda And Nissan Offer Different Benefits For Different Types Of Investors

Includes: HMC, NSANY, TM
by: Benjamin Goldman

Japanese automotive companies have struggled over the past few years as they have had to survive a down Japanese economy. Although Toyota (NYSE:TM), Honda (NYSE:HMC), and Nissan (OTCPK:NSANY) have faced earnings downfalls in 2007, analysts expect them to bounce back over the next couple of years. Although all three companies have a lot in common, each of their stocks is a good investment for three different groups of investors. In this article, I explain why Toyota is a good buy for large cap investors, Honda is a good buy for value investors, and Nissan is a good buy for growth investors.

Toyota is one of the largest companies in the world, reporting $220.86 billion in revenue in FY 2011, which ended in March. Its cars are known for value and reliability, but Toyota’s recall in 2009 put their earnings into the red. Since then, Toyota has bounced back and has shown that it can handle setbacks, which is a good quality to have in such a volatile economy. This makes Toyota a great buy for investors looking to get into large cap stocks. If the Japanese economy can recover from its recent hardships and the “lost decade”, Toyota shares will be among the first stocks to be bought up by investors. I believe that Toyota shares are valued right around where they should be priced, so for those looking for undervalued bargain stocks, Toyota is not the place to look as there are much better options in the automotive industry.

Honda’s business is very similarly structured much like Toyota, but its revenues are about half of Toyota’s. Honda’s P/E ratio of 14.51 initially appears high for an automotive company in today’s market, but this stems mostly from Honda’s decreased earnings due to hard economic times. In FY 2013, Honda’s earnings per share is expected to increase to $4.01, making it a good value at its current price of $30.56, especially considering how they are an automotive company that has shown that they can consistently report positive earnings. Compared to Toyota, Honda is a good buy for value investors who believe that Honda will bounce back from its recent down earnings.

Nissan’s revenues are currently about the same as Honda’s, but Nissan is expected to have more revenue growth over the next two years. In addition, Nissan beat Toyota and Honda in becoming the first Japanese automotive company to release a well-marketed fully electric car in the American market. For those who believe in the future of the electric car, Nissan may be a good buy right now due to the potential market share they can take from having a first mover advantage in the world’s largest car market. In addition, Nissan trades at the lowest P/E ratio of any of these three Japanese car companies at 9.43.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.