Will Aston Martin shares be a luxury you can’t afford?
There are concerns that luxury car brand Aston Martin will be just too expensive when it joins the stock market in early October.
The pricing range of the IPO, offering 25% of the business at between £17.50 and £22.50 per share, implies a valuation at the top end of a little more than £5bn.
The company reported net profit of £77m in 2017 which together with the mooted market cap feeds into a trailing price-to-earnings (PE) ratio of 65-times.
Italian sports car giant Ferrari, which we wrote about in-depth in July, is a good benchmark. Based on its own market cap of $26.5bn and 2017 earnings of $645m, Ferrari currently trades on a PE of 41-times.
Aston Martin undoubtedly has a strong brand, synonymous with the James Bond films, but its track record is hardly unblemished with seven bankruptcies since its inception in 1913.
There are also short and long-term challenges on the horizon for the business. In the short term there is the disruption to the car industry threatened by Brexit and in the long term, the coming electric vehicle revolution.
We feel its growth plan looks too aggressive and that the shares may not be a good long term investment, even if they do jump immediately on listing. (TS)
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell Youinvest.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
- Brexit tensions stoked as political storm clouds gather
- BAE Systems finally gets jet fighter green light
- Will Aston Martin shares be a luxury you can’t afford?
- Sit tight with Randgold as it may attract a counter bid to Barrick's merger proposal
- Woodford Patient Capital springs back to life
- Why the potential Uber-Deliveroo deal could be a ‘terrifying’ development for Just Eat