Stock of the Week Under $10: American Axle & Manufacturing
The recent United Auto Workers strike has taken its toll on both automakers and the large number of companies that supply them. This temporary bump in the road may provide an opportunity to pick up certain auto related stocks at prices that otherwise wouldn’t be available. American Axle Manufacturing (AXL) could be one company that has traded to the low end of its most recent trading range.
With positive noise around a possible resolution of the automobile workers (UAW) strike, it isn’t a bad time to start looking at auto related names. I’m not as excited about the automakers themselves, as they are going to have higher costs related to labor moving forward.
But, auto suppliers who were beaten down both in anticipation of the UAW strike and as the actual strike played out, like American Axle Manufacturing (AXL), are worth a closer look here.
The company produces driveline systems and related components, and should see improvement in the next few quarters as the hangover from the strikes comes to an end. The consensus target for AXL stock is almost 50% higher than the current stock price which is just over $7.
From a valuation perspective AXL is trading at just 9.6x projected earnings and 4x free cash flow. The company has a PE of just under 20, and trades at only one and a half times book value.
American Axle is moving with the industry toward providing more products for EVs, and sees the addressable market for their electric products reaching $20-30 billion by the year 2030. Along those lines, the company has recently signed EV deals with Stellantis, AMG, and Jaguar among others.
AXL’s highest rating in our POWR Ratings is, not surprisingly given the recent pull back, in the Value category. It outperforms over 95% of the stocks tracked in the POWR Ratings in that category.
The stock is trading much closer to the low end of a range it has been in for almost 2 years, from just under $7 to around $12. With a combination of automakers coming back online, and continued expansion of the EV space, AXL could head higher into that range.
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AXL shares . Year-to-date, AXL has declined -8.57%, versus a 9.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Jay Soloff
Jay is a former professional market maker who cut his teeth trading on the floor of the CBOE. With more than 20 years of experience trading and investing, his focus is on making professional strategies accessible to everyone, which is exactly what does in his highly profitable POWR Income and POWR Stocks Under $10 investment advisory services.
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