In This Article:
TI Fluid Systems plc (LON:TIFS), a UK£1.0b small-cap, is an auto company operating in an industry which is a major player in the economy due to its high commodity consumption. A challenge facing the sector is navigating the path to driverless cars, requiring high capital outlays in technology. Automobile analysts are forecasting for the entire industry, a strong double-digit growth of 17% in the upcoming year , and an enormous growth of 32% over the next couple of years. However this rate still came in below the growth rate of the UK Today, I will analyse the industry outlook, as well as evaluate whether TI Fluid Systems is lagging or leading its competitors in the industry.
Check out our latest analysis for TI Fluid Systems
What’s the catalyst for TI Fluid Systems’s sector growth?
The increasing presence of tech firms in the auto industry cannot be discounted by OEMs. In the past year, the industry delivered growth in the teens, beating the UK market growth of 14%. TI Fluid Systems leads the pack with its impressive earnings growth of 27% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with TI Fluid Systems poised to deliver a 53% growth over the next couple of years compared to the industry’s 17%. This growth may make TI Fluid Systems a more expensive stock relative to its peers.
Is TI Fluid Systems and the sector relatively cheap?
Automobile companies are typically trading at a PE of 11.66x, relatively similar to the rest of the UK stock market PE of 16.1x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 15% compared to the market’s 12%, potentially illustrative of a turnaround. On the stock-level, TI Fluid Systems is trading at a PE ratio of 11.36x, which is relatively in-line with the average automobile stock. In terms of returns, TI Fluid Systems generated 9.1% in the past year, which is 5.5% below the automobile sector.
Next Steps:
TI Fluid Systems’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If TI Fluid Systems has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at TI Fluid Systems’s fundamentals in order to build a holistic investment thesis.