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Editor's note: Seeking Alpha is proud to welcome Zoltan Kaldosi as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to the SA PRO archive. Click here to find out more »
Despite negative market trends in the automotive sector, innovative companies, such as Valeo (OTCPK:VLEEF) have great growth potential. Further, the recent nearly 50% share price drop has created an excellent entry point.
What is the reason for the major decline in Valeo's price?
In the second half of 2018, Valeo’s results were significantly impacted by worsening market conditions, the implementation of the new WLTP (Worldwide Harmonised Light Vehicle Test Procedure) test cycle for cars in Europe, the sharp slowdown in the Chinese market, the rise in the price of raw materials and the shortage of electronic components. These negative market trends not only affected Valeo but also many automotive suppliers and car makers. On account of these negative trends, the company will revise its medium-term outlook. The Group will publish its new medium-term objectives during the Investor Day, which will be held before the end of 2019.
Is the valuation attractive?
Both valuation metrics, EV-to-EBIT and P/E, represent an attractive valuation of the five-year horizon. The charts show that the stock is already rebounding from its lowest point at the end of 2018.
In short, the valuation, even at the current level, looks attractive enough to examine further. Here, you may have some questions. What is already priced in with
