Rev Your Engines: Why Toyota Is the Best Auto Stock to Own Now


  • Surging sales of hybrid vehicles has led Toyota (TM) to double its profit. 
  • The company remains the world’s biggest selling automaker with a 10% global market share.
  • The combined focus on hybrids and fully electric vehicles should drive future growth at the automaker.  
TM Stock - Rev Your Engines: Why Toyota Is the Best Auto Stock to Own Now

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A successful focus on gas-electric hybrid vehicles has led to Toyota Motor Corp.’s (NYSE:TM) sales and profits surging, making TM stock the best automotive buy out there.

In the last 12 months, TM stock has risen 55%, including a 21% gain so far this year. Compare that to a 9% increase in the share price of Ford Motor Co. (NYSE:F) and a 5% gain in the stock of Tesla (NASDAQ:TSLA) over the last 12 months. It rose because of stellar earnings reports and an electrification strategy that analysts are bullish on.

TM Stock and Doubling Profits

At the start of May, Toyota released its latest financial results, and they were exceptional. The Japanese automaker reported that its profit doubled in the fiscal year that ended on March 31. Sales rose 21% to $290 billion.

The results come as Toyota’s worldwide sales increased to 9.4 million vehicles, up 7% from 8.8 million vehicles sold in the previous fiscal year. Toyota remains the world’s top-selling automotive company, with a 10% share of the global market.

Toyota’s strong results were due to growing sales of its hybrid gas-electric vehicles. For years, the automaker was criticized for focusing on hybrids rather than fully electric vehicles.

Now, it turns out that was the right call with consumers moving away from EVs in favor of hybrids. Toyota is the world leader in hybrid vehicles, having pioneered the Prius, one of the first gas-electric cars, and selling more than 40 hybrid vehicle models around the world today.

Growth Strategy

Toyota is not a company that rests on its laurels. Even with its success, the company is always pushing to do better. The company follows the Japanese philosophy of “Kaizen,” which focuses on continuous improvement and efficiency gains.

When announcing its most recent earnings, management forecast even higher motor vehicle sales for this year, with plans t0 sell at least 9.5 million vehicles worldwide. Growth in 2024 is expected to be concentrated in the U.S. and throughout Asia.

While it continues to make hybrid versions of nearly all its vehicle models, Toyota has also adopted an aggressive electrification strategy. Last summer, the company announced plans to develop a full lineup of electric vehicles, as well as next generation batteries to power them.

Specifically, the company has set itself the goal of selling 1.5 million electric vehicles per year by 2026 and 3.5 million battery-powered vehicles annually by 2030.

The automaker added that it is aiming for a driving range of 1,000 kilometers for all future EVs. That’s nearly double the longest driving range of any Tesla electric vehicle currently.

Toyota CEO Koji Sato recently warned of a 20% profit decline in the current fiscal year due to a ramp-up in investments related to the company’s EV strategy. However, the company still plans to keep hybrid vehicles front-and-center, focusing on what it calls a “multi-pathway strategy” for its future success.

Buy Toyota Stock

Toyota Motor Co. is firing on all cylinders and lapping the competition. Despite its success and share price appreciation, TM stock is currently trading at just nine times future earnings estimates.

The company also pays its stockholders a quarterly dividend of $1.13 per share for a yield of 2.05%. With its hybrid sales surging and its EV strategy kicking into high gear, there’s every reason to believe that the company can continue to accelerate. Toyota stock is a buy.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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