THE COMMERCIAL AUTOMOTIVE TELEMATICS MARKET IS ESTIMATED TO HIT $31.09 BILLION BY 2023 according to the new market research report by IndustryARC (The Commercial Automotive Telematics Market).
Telematics is an interdisciplinary field that encompasses telecommunications, vehicular technologies, road transportation, road safety, electrical engineering (sensors, instrumentation, wireless communications, etc.), and computer science (multimedia, Internet, etc.).
Commercial Vehicle Group designs, engineers, produces, and sells a range of cab related products and systems in North America, Europe, and the Asia Pacific regions.
In the last year, revenue has grown by 21.72% but the company has struggled with revenue over the years.
Measured over the last 5 years, revenue has barely grown by 1.3% yearly. I don’t mind this too much because that’s why we can still get this stock for so cheap. The important point is that revenue growth is accelerating. That same acceleration of sales is showing up in the EPS.
The EPS has grown by an impressive 51.72% over the past year. Measured over the last 5 years, the EPS has been growing by 23.75% yearly. Based on analyst forecasts for the next 2 years, EPS will grow by 76.45% on average per year.
The large players volume popped on the last earnings report.
So what could be wrong with this stock? It’s a potential value trap stock. Anytime your research brings you to a stock with a really P/E ratio, you should always check its profitability metrics to determine if it could be a value trap. In particular, you want to focus on the profit margin metric.
The profitability metrics of Commercial Vehicle Group are bad. CVGI’s return on assets of 1.88% is worse than the rest of the industry. The industry average return on assets is 4.66%. CVGI has a return on equity of 8.7%. This is below the industry average of 16.44%. 84% of the industry peers outperform CVGI. CVGI’s profit margin of 0.94% is worse than the rest of the industry. The industry average profit margin is 4.13%. 81% of the industry peers have a better profit margin.
While there’s a lot to like about Commercial Vehicle Group stock and the rapidly growing automotive telematics market, this risk that CVGI stock could be a value trap is just too high. Remember, we’re on the hunt for the crème de la crème. For now, CVGI stock gets the too hot to handle rating.