Honda Motor Co Ltd (NYSE: HMC)

Sector: Consumer Cyclical Industry: Auto Manufacturers CIK: 0000715153
Market Cap 41.25 Bn
P/B 0.52
P/E 12.95
P/S 0.30
ROIC (Qtr) 266.60
Div Yield % 2.28
Rev 1y % (Qtr) -2.97
Total Debt (Qtr) 88.85 Bn
Debt/Equity (Qtr) 1.11
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About

Honda Motor Co., Ltd., often recognized by its stock symbol HMC, is a Japanese multinational corporation that operates in the automotive, motorcycle, and power equipment industries. Established in 1948 by Soichiro Honda and Takeo Fujisawa, Honda has grown into one of the most successful companies globally. Honda's primary business activities encompass the development, manufacturing, and sale of motorcycles, automobiles, and power products. These activities span across over 160 countries, with operations in Asia, North America, Europe, and other...

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Investment thesis

Bull case

  • Operating cash flow of 5.24B provides exceptional 13.60x coverage of interest expenses 385.52M, showing strong debt service capability.
  • Cash position of 31.13B provides exceptional 73.65x coverage of minority interest expenses 422.63M, indicating strong liquidity.
  • Long-term investments of 58.72B provide solid 1.06x coverage of long-term debt 55.26B, indicating strategic financial planning.
  • Robust tangible asset base of 204.34B provides 9.69x coverage of working capital 21.08B, indicating strong operational backing.
  • Short-term investments of 20.02B provide solid 1.36x coverage of other current liabilities 14.69B, indicating strong liquidity.

Bear case

  • Operating cash flow of 5.24B barely covers its investment activities of (5.40B), with a coverage ratio of -0.97, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (5.40B) provide weak support for R&D spending of 8.09B, which is -0.67x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 5.24B provides thin coverage of dividend payments of (1.83B) with a -2.87 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 31.13B provide limited coverage of acquisition spending of (683.31M), which is -45.55x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating earnings of 5.51B show weak coverage of depreciation charges of 5.46B, with a 1.01 ratio indicating high capital intensity and potential reinvestment needs.

Types of customers [axis] Breakdown of Revenue (2024)

Types of customers [axis] Breakdown of Revenue (2024)

Peer comparison

Companies in the Auto Manufacturers
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 TSLA Tesla, Inc. 1,320.28 Bn 347.99 13.92 8.38 Bn
2 TM Toyota Motor Corp/ 319.29 Bn 13.45 0.99 293.92 Bn
3 GM General Motors Co 77.56 Bn 24.39 0.42 130.28 Bn
4 RACE Ferrari N.V. 66.95 Bn 35.53 8.04 3.38 Bn
5 F Ford Motor Co 56.20 Bn 7.14 0.35 163.34 Bn
6 HMC Honda Motor Co Ltd 41.25 Bn 12.95 0.30 88.85 Bn
7 STLA Stellantis N.V. 24.00 Bn -8.53 0.14 -
8 RIVN Rivian Automotive, Inc. / DE 19.56 Bn -5.36 3.63 4.99 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.02 1.21
EV to Cash from Ops. EV/CFO 0.69 3.90
EV to Debt EV to Debt 0.04 29.88
EV to EBIT EV/EBIT 0.65 12.72
EV to EBITDA EV/EBITDA 0.37 8.45
EV to Free Cash Flow [EV/FCF] EV/FCF 2.03 10.17
EV to Market Cap EV to Market Cap 0.09 308,127.46
EV to Revenue EV/Rev 0.03 11.91
Price to Book Value [P/B] P/B 0.52 3.20
Price to Earnings [P/E] P/E 12.95 12.53
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.01 0.42
Dividend Payout Ratio % Div Payout % (Qtr) 29.60 2.47
Dividend per Basic Share Div per Share (Qtr) 0.71 0.36
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.34 2.50
Interest Coverage Int. cover (Qtr) 14.30 8.29
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -24.86 -57.61
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -1.87 59.50
Dividend Growth (1y) % Div 1y % (Qtr) -21.84 1.34
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -50.74 -1,066.49
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -30.30 -19.23
EBIT Growth (1y) % EBIT 1y % (Qtr) -45.91 -1,024.45
EBT Growth (1y) % EBT 1y % (Qtr) -47.53 -231.75
EPS Growth (1y) % EPS 1y % (Qtr) -42.72 -70.11
FCF Growth (1y) % FCF 1y % (Qtr) 532.30 -16.56
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -6.15 -5.98
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.00 0.34
Cash Payout Ratio Cash Payout (Qtr) 0.21 0.03
Cash Ratio Cash Ratio (Qtr) 0.53 0.37
Current Ratio Curr Ratio (Qtr) 1.36 1.19
Debt to Equity Ratio Debt/Equity (Qtr) 1.11 1.05
Interest Cover Ratio Int Coverage (Qtr) 14.30 8.29
Times Interest Earned Times Interest Earned (Qtr) 14.30 8.29
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 8.00 -2,590.34
EBIT Margin % EBIT Margin % (Qtr) 626.20 -104,390.42
EBT Margin % EBT Margin % (Qtr) 3.74 -3,158.64
Gross Margin % Gross Margin % (Qtr) 20.50 -649.03
Net Profit Margin % Net Margin % (Qtr) 2.30 -3,160.67