AB Volvo (VLVLY) and Ferrari (RACE) Critical Review

AB Volvo (OTCMKTS: VLVLY) and Ferrari (NYSE:RACE) are both large-cap auto/tires/trucks companies, but which is the better business? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, profitability, valuation, analyst recommendations and dividends.

Analyst Recommendations

This is a breakdown of recent ratings for AB Volvo and Ferrari, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AB Volvo 0 0 2 0 3.00
Ferrari 1 3 5 0 2.44

Ferrari has a consensus target price of $127.43, indicating a potential downside of 2.87%. Given Ferrari’s higher probable upside, analysts clearly believe Ferrari is more favorable than AB Volvo.

Dividends

AB Volvo pays an annual dividend of $0.38 per share and has a dividend yield of 2.1%. Ferrari pays an annual dividend of $0.68 per share and has a dividend yield of 0.5%. AB Volvo pays out 30.9% of its earnings in the form of a dividend. Ferrari pays out 21.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Profitability

This table compares AB Volvo and Ferrari’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AB Volvo 6.32% 21.74% 5.63%
Ferrari 16.44% 79.32% 13.77%

Volatility & Risk

AB Volvo has a beta of 1.46, meaning that its share price is 46% more volatile than the S&P 500. Comparatively, Ferrari has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500.

Earnings & Valuation

This table compares AB Volvo and Ferrari’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AB Volvo $39.24 billion 0.95 $2.46 billion $1.23 14.85
Ferrari $3.86 billion 6.42 $605.15 million $3.19 41.13

AB Volvo has higher revenue and earnings than Ferrari. AB Volvo is trading at a lower price-to-earnings ratio than Ferrari, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

0.1% of AB Volvo shares are held by institutional investors. Comparatively, 32.1% of Ferrari shares are held by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Ferrari beats AB Volvo on 10 of the 15 factors compared between the two stocks.

About AB Volvo

AB Volvo (publ), together with its subsidiaries, manufactures and sells trucks, buses, construction equipment, and marine and industrial engines in Europe, North America, South America, Asia, and internationally. The company offers trucks for long-haulage, construction, and distribution purposes under the Volvo, UD, Renault, Mack, Eicher, and Dongfeng Trucks brands; and city and intercity buses, coaches, and bus chassis under the Volvo, UD, Prevost, and Nova Bus brands. It also provides construction equipment, including excavators, wheel loaders and haulers, and road machinery under the brand names of Volvo, SDLG, and Terex Trucks. In addition, the company offers diesel engines for leisure boats; marine propulsion systems; drive systems and engines for propulsion and auxiliary equipment, and marine generator sets; and industrial engines for use in container terminals, mines, and other industrial applications under the Volvo Penta brand name. Further, it provides financial solutions, such as customer financing and leasing, dealer financing, and insurance; rental, preventive maintenance, assistance, and IT services; spare parts; and transport information systems. The company offers its products and services through a network of dealerships and workshops. AB Volvo (publ) was founded in 1915 and is headquartered in Gothenburg, Sweden.

About Ferrari

Ferrari N.V., through with its subsidiaries, designs, engineers, produces, and sells luxury performance sports cars. The company offers sports cars, GT cars, special series cars, limited edition supercars, limited editions series, and one-off cars; and open air roadsters and two-seater mid-rear-engined roadsters. It also provides non-registered racing cars; and parts, as well as after sales, repair, maintenance, and restoration services for cars. In addition, the company licenses its Ferrari brand to various producers and retailers of luxury and lifestyle goods; and Ferrari World, a theme park in Abu Dhabi, the United Arab Emirates. Further, it offers non-registered racing cars; and parts, as well as after sales, repair, maintenance, and restoration services for cars. Additionally, the company provides direct or indirect finance and leasing services to retail clients and dealers; and manages race tracks, as well as owns and manages two museums in Maranello and Modena, Italy. As of December 31, 2017, it had a total of 48 retail Ferrari stores, including 30 franchised stores and 18 owned stores. The company also sells its products through a network of 164 authorized dealers operating 185 points of sale worldwide, as well as through its Website, store.ferrari.com. The company was founded in 1947 and is headquartered in Maranello, Italy.

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