Landi Renzo Sp.A. (BIT:LR), a €177.08M small-cap, operates in the auto industry which is a major player in the economy due to its high commodity consumption. Incumbents’ limitation is an opportunity for tech giants to develop key software behind auto capabilities. Automobile analysts are forecasting for the entire industry, a highly optimistic growth of 44.16% in the upcoming year , and a massive triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the IT In this article, I’ll take you through the automobile sector growth expectations, and also determine whether Landi Renzo is a laggard or leader relative to its automobile sector peers. See our latest analysis for Landi Renzo
What’s the catalyst for Landi Renzo’s sector growth?
The increasing presence of tech firms in the auto industry cannot be overlooked or discounted by OEMs. In the next decade, software integration will likely have a significant impact on the auto industry, given the alignment of their expertise – they are proficient at seamlessly connecting components to create networks valued by consumers for the information, efficiencies, and experiences they deliver. In the past year, the industry delivered growth of over 50%, beating the IT market growth of 16.97%. Landi Renzo leads the pack with its impressive industry-beating growth rate of 51.04% in the upcoming year.
Is Landi Renzo and the sector relatively cheap?
Automobile companies are typically trading at a PE of 19.79x, in-line with the IT stock market PE of 20.8x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 13.17% compared to the market’s 10.89%, potentially illustrative of a turnaround. On the stock-level, Landi Renzo is trading at a higher PE ratio of 42.78x, making it more expensive than the average automobile stock. In terms of returns, Landi Renzo generated 6.53% in the past year, which is 6.64% below the automobile sector.
Next Steps:
Landi Renzo’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Landi Renzo has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other automobile companies. However, before you make a decision on the stock, I suggest you look at Landi Renzo’s fundamentals in order to build a holistic investment thesis.