The Motley Fool

Forget the Aston Martin share price, I’d buy this FTSE 250 income champion instead

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

3d illustration of many red arrows pointng on the left and a green one pointing on the right side of the image.
Image source: Getty Images

Luxury car-maker Aston Martin (LSE: AML) came to the market with a great deal of fanfare at the end of 2018. However, since the company’s IPO, the shares have failed to live up to expectations. 

Year-to-date, the stock has underperformed the FTSE 100 by around 30% and every £10,000 invested in the company at its IPO is worth just £7,000 today.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Terrible update

It doesn’t look as if this performance is going to improve any time soon. Earlier this year, management warned that the company is facing challenging market conditions, and this challenging environment has persisted.

As a result, the company now expects wholesale vehicle delivery volumes to sit between 6,300 to 6,500 in 2019, that’s down from guidance of around 7,100 to 7,300 in February, a reduction management has labelled “disappointing“. 

The decline in wholesale volumes is also expected to weigh on profit margins. Management is now forecasting an adjusted earnings before interest, taxes, depreciation and amortisation margin of around 20% for 2019, down from 24% as reported in February. The one bright spot in the group’s business is retail sales, which expanded 26% in the first half of the year. But this hasn’t been enough to offset the decline in wholesale sales volumes.

Against this backdrop, management says it is “taking decisive action to manage inventory and the Aston Martin Lagonda brands for the long term,” which includes reducing capital spending and concentrating on the quality, not the number of vehicles produced. That’s all well and good, but falling sales volumes aren’t going to bolster investor confidence in the company, which is badly needed considering the stock’s performance since its IPO.

With this being the case, unless there is some good news from the company soon, I think shares in Aston Martin will only continue to decline as investors drift away from the floundering business.

A better buy

In my opinion, a better business to invest your hard-earned money in is Greene King (LSE: GNK).

Greene King and Aston Martin couldn’t be more different. One’s a UK-focused pub operator, and the other is a global luxury car brand. One conjures up images of lukewarm pub food and sticky tables, while the other produces cars driven by James Bond.

However, Greene King is profitable and has a history of returning cash to investors, while Aston Martin is losing money and has declared bankruptcy seven times

As an investor, I know which company I would rather own. This year, City analysts believe Greene King will report a net profit of nearly £200m and earnings per share of 64p, which puts the stock on a forward P/E of just 10. On top of this, analysts have pencilled in a dividend per share of 33.3p, of giving a dividend yield of 5.1% at current levels. These metrics are desirable when compared to Aston Martin. With wholesale car deliveries falling, there’s a good chance the firm could report a loss for 2019, and there’s no chance of a dividend for at least several years.

That being said, Greene King is facing its own problems. Rising costs and cooling consumer spending are potential risks to growth, but the company has so far managed to deal with these problems effectively. Analysts are predicting an 18% increase in earnings per share this year. That’s why I’d rather invest my money in Greene King than struggling Aston Martin.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.