Two Automotive Equipment Giants Shine Bright
Exploring the Zacks Rank #1 (Strong Buy) roster, we find Allison Transmission Holdings (ALSN) and Dorman Products (DORM) glittering like diamonds in the rough when it comes to value.
In the automotive domain, Allison Transmission offers fully automatic transmissions and propulsion solutions for commercial and defense vehicles, while Dorman Products supplies replacement and upgrade parts in the motor vehicle aftermarket.
Driving Value with Allison Transmission
Allison Transmission’s stock boasts an “A” Zacks Style Scores grade for Value, with its P/E discount currently standing enticingly low. Priced at $82, the stock carries a 10.6X forward earnings multiple, a significant dip compared to the Zacks Automotive-Original Equipment industry’s average of 19.1X.
Image Source: Zacks Investment Research
Allison Transmission is expected to witness a 3% increase in annual earnings in fiscal 2024, with a projected 9% leap in FY25 to $8.38 per share. The stock also trades at 2.2X forward sales, nearing the optimal benchmark of less than 2X. Moreover, the company’s top line is predicted to grow by 2% this year and is slated for a further 5% surge in FY25 to $3.27 billion.
Image Source: Zacks Investment Research
Spotlight on Dorman Products
With a “B” Zacks Style Scores grade for Value, Dorman Products trades at $97 with a 17.4X forward earnings ratio, comfortably below the S&P 500’s 21.9X and closer to its Zacks Automotive-Replacement Parts industry average of 14.6X.
Image Source: Zacks Investment Research
Additionally, Dorman Products’ EPS is anticipated to surge by 22% this year, with expectations for a further 10% growth in FY25 to $6.14 per share. The stock is valued at 1.5X sales, with revenue expected to expand by 4% in both FY24 and FY25.
Image Source: Zacks Investment Research
Blistering Price Performances
Year to date, Allison Transmission shares have surged +43% while Dorman Products’ stock climbed +16%, outshining the broader indexes. Furthermore, earnings estimate revisions for Allison Transmission and Dorman Products’ FY24 and FY25 have seen significant upticks over the last 60 days, hinting at promising short-term potential.
Image Source: Zacks Investment Research
The Road Ahead
With appealing valuations coupled with robust growth forecasts, the current climate seems like an auspicious juncture to invest in Allison Transmission and Dorman Products. Undoubtedly, it would be no shocker if their stocks continued hurtling upwards throughout the year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
