Tata Motors (TTM) shares continue to surge, but thanks to huge estimate revisions the valuations are incredibly cheap.
If you are looking for exposure the BRIC countries, this Indian auto maker is a great option.
Company Description
Tata Motors is India’s largest auto maker and also owns premium brands like Jaguar and Land Rover. The company is the world’s fourth largest truck maker and second largest buss maker.
A Strong October
On Nov 15 Tata Motors announced that it sold 86,705 vehicles in October, which is an 18% jump since the previous October. Luxury brands did well, with combined sales for Jaguar Land Rover up by 21% by volume. Much of that is due to Land Rover which sold about 5 times the units that Jaguar does.
Estimates Jump
Estimates are up sharply over the past 2 months, from $2.28 to $3.14. Next year’s average forecast is now $3.87, up from $2.82. This puts annual growth rates at 205% and 23%, respectively.
Some of the increase that pushed shares to a Zacks #1 Rank (Strong Buy) is due to the strong October sales report, but much is also thanks to the most recent quarterly report.
Analysts do not provide quarterly estimates, so there was no surprise, but the raw numbers were enough to push expectations higher. Revenue for the second quarter was up 37%
Valuations
So let me get this straight? A company in a red-hot BRIC country is expected to triple its earnings this fiscal year. They much have outlandish valuations. Wrong.
The forward P/E of 10 times says shares are steal. The PEG ratio is a bargain-basement 0.3 times.
The Chart
Estimates for TTM are almost off the charts and for good reason. While China and Brazil get all the attention, India is rapidly growing and going virtually unnoticed. So, its not too late to get in on an emerging market with much less political risk than the other 3 BRIC countries.
Just look at the long-term earnings trend looks like.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
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