Do you feel that large-cap stocks representing U.S.-based companies are overvalued now? Maybe you just need to expand your geographic horizons, then. I encourage you to conduct your due diligence on Japanese automotive giant Toyota Motor (NYSE:TM). Soon enough, you’ll see why Toyota stock offers such a compelling value.
Sure, Toyota has problems and so does the Japanese economy in general. Yet, sometimes problems create bargains in the financial markets, especially if the problems aren’t permanent. So, let’s take a trip abroad (in our imaginations, at least) and see what’s going on with Toyota.
Toyota Stock Pulls Back from $250
Toyota stock reached $250 a couple of times earlier this year, but then pulled back sharply. This occurred during a time when Japan’s economy was under pressure.
A Bloomberg report described Japan’s economy as “flatlining” and identified two contributing factors. One cited factor was the “negative impact of a New Year’s Day earthquake northwest of Tokyo.”
Obviously, this is a temporary situation that’s in the past, though the financial impact could last for a while.
The other cited factor was “disruptions to auto production and sales after a certification scandal blew up at” Toyota Motor subsidiary Daihatsu Motor. Again, this doesn’t appear to be a permanent problem.
The Bloomberg report also discussed Japan’s inflation, but this is an international problem that’s been ongoing in a post-Covid-19 world. It certainly didn’t stop the American stock market from hovering near all-time highs recently.
In any case, investors shouldn’t overlook Toyota’s compelling value proposition. Currently, Toyota’s GAAP trailing 12-month price-to-earnings ratio is just 9.13x. That’s half of the sector median P/E ratio of 18.27x.
Toyota Forges Ahead With New EV Models
Despite the aforementioned economic headwinds, Toyota is moving full steam ahead with clean-energy vehicle production. Previously, I detailed Toyota’s progress in advancing hybrid electric vehicles.
Now, Toyota is testing a new electric vehicle to be manufactured in Thailand. It’s called Hilux, and it’s a battery-electric pickup truck.
The Hilux EV could prove to be a significant revenue generator for Toyota. Interestingly, pickup trucks comprise “more than half of total vehicle sales in Thailand,” according to Reuters.
In addition, AutoBlog reported that Toyota is collaborating with Subaru (OTCMKTS:FUJHY) to “produce three new electric crossovers over the next two years.” Like Toyota, Subaru is a well-known Japanese automaker. So, this team-up could be a game changer in Asia’s EV market during the coming quarters.
Toyota Stock: Temporary Problems, Great Opportunity
Toyota Motor is reasonably valued in the financial markets, and the share price pulled back because of factors that are probably temporary. Really, investors ought to be grateful for this buying opportunity.
Besides, if you’re bullish on the global EV and HEV market, then Toyota should definitely be on your watch list. Therefore, today is a great day to buy Toyota stock in anticipation of a recovery to $250.
On the date of publication, David Moadel 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 InvestorPlace.com Publishing Guidelines.
