Honda Motor (HMC) and Tata Motors (TTM) Critical Review

Tata Motors (NYSE: TTM) and Honda Motor (NYSE:HMC) are both large-cap auto/tires/trucks companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, dividends, earnings, profitability, valuation, institutional ownership and analyst recommendations.

Dividends

Honda Motor pays an annual dividend of $0.75 per share and has a dividend yield of 2.7%. Tata Motors does not pay a dividend. Honda Motor pays out 22.9% of its earnings in the form of a dividend. Tata Motors has raised its dividend for 3 consecutive years.

Earnings and Valuation

This table compares Tata Motors and Honda Motor’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Tata Motors $40.45 billion 0.49 $4.00 billion $1.63 17.99
Honda Motor $128.93 billion 0.39 $12.12 billion $3.28 8.40

Honda Motor has higher revenue and earnings than Tata Motors. Honda Motor is trading at a lower price-to-earnings ratio than Tata Motors, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Tata Motors and Honda Motor, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tata Motors 0 2 2 0 2.50
Honda Motor 0 3 2 0 2.40

Tata Motors currently has a consensus price target of $30.00, suggesting a potential upside of 2.32%. Honda Motor has a consensus price target of $35.00, suggesting a potential upside of 27.09%. Given Honda Motor’s higher possible upside, analysts clearly believe Honda Motor is more favorable than Tata Motors.

Institutional & Insider Ownership

12.7% of Tata Motors shares are owned by institutional investors. Comparatively, 2.6% of Honda Motor shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Tata Motors and Honda Motor’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Tata Motors 3.38% 19.45% 4.54%
Honda Motor 4.58% 8.57% 3.44%

Volatility & Risk

Tata Motors has a beta of 2.26, meaning that its stock price is 126% more volatile than the S&P 500. Comparatively, Honda Motor has a beta of 1.01, meaning that its stock price is 1% more volatile than the S&P 500.

Summary

Tata Motors beats Honda Motor on 9 of the 15 factors compared between the two stocks.

About Tata Motors

Tata Motors Limited is an automobile company. The Company is engaged in manufacture of motor vehicles. The Company is engaged mainly in the business of automobile products consisting of all types of commercial and passenger vehicles, including financing of the vehicles sold by the Company. The Company’s segments include automotive operations and all other operations. The Company’s automotive segment operations include all activities relating to the development, design, manufacture, assembly and sale of vehicles, including vehicle financing, as well as sale of related parts and accessories. In the automotive segment, the Company manufactures and sells passenger cars, utility vehicles, light commercial vehicles, and medium and heavy commercial vehicles. The Company’s all other operations segment mainly includes information technology (IT) services, and machine tools and factory automation services. The Company operates in over 160 countries across the world.

About Honda Motor

Honda Motor Co., Ltd. (Honda) develops, manufactures and markets motorcycles, automobiles and power products across the world. The Company’s segments include Motorcycle Business, Automobile business, Financial services business, and Power product and other businesses. The Company produces a range of motorcycles, with engine displacement ranging from the 50 cubic centimeters class to the 1,800 cubic centimeters class. Its automobiles use gasoline engines of three, four or six cylinder, diesel engines, gasoline-electric hybrid systems and gasoline-electric plug-in hybrid systems. Honda offers a range of financial services to its customers and dealers through finance subsidiaries in countries, including Japan, the United States, Canada, the United Kingdom, Germany, Brazil and Thailand. Honda manufactures a range of power products, including general-purpose engines, generators, water pumps, lawn mowers, riding mowers, grass cutters, brush cutters, tillers and snow blowers.

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