Down 55% in a year, is the Aston Martin share price now a glaring buy?

With increasing revenue and narrowing losses, does the current Aston Martin share price add up to a buying opportunity for me?

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Key points

  • For the 2021 calendar year, pre-tax losses more than halved from £466m to £213.8m, year on year
  • Total wholesales grew 82% compared to the 2020 calendar year
  • The company is venturing into the electric car market with its new DBX model

UK-based car company Aston Martin Lagonda (LSE:AML) is famous for its luxury sports cars. Having suffered during the pandemic (and before), recent results appear to show it is recovering at pace. But the Aston Martin share price is down 55% in the past year and currently trades at 868p. Should I add this firm to my long-term portfolio? Let’s take a closer look.

Recent results and the Aston Martin share price

In its annual report for the 12 months to 31 December 2021, the company stated that revenue amounted to £1bn. This was a 66.7% increase from the 2020 figure, when it had been just £600m.

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In addition, pre-tax losses narrowed to £213.8m, down from £466m the previous year. And while the firm is still loss-making, it gives me confidence as a potential investor to see these losses more than halving year on year. 

The business also announced that sales rose 12% compared with 2019, while total wholesale revenue jumped 82%. To me, this appears to show that the company is on the path to consistent growth.

A strong base for the future?

Going forward, the firm plans to sell 10,000 cars annually. Currently, this figure sits at around 6,000. If the company were to achieve this target, this could result in revenue of about £2bn by 2024 or 2025.

Given that the business is over 60% of the way to reaching 10,000, and sales are growing at a high annual rate, this target seems realistic. This revenue stream could ultimately have a positive impact on the Aston Martin share price.

Furthermore, the firm is venturing into the electric car market. Specifically, the DBX model is being rolled out in many countries, including China, and is the trailblazer for Aston Martin’s move into electrification. The company hopes to have a bigger portfolio of electric models by 2030.

On the other hand, the firm has had a problematic history since listing its shares. And its net debt pile stands at £1.29bn. It has previously conducted share issues to try and control it. My Motley Fool colleague Christopher Ruane previously stated that net debt stood at £809m at the end of September 2021. If debt continues to climb, I wouldn’t be surprised if the firm is forced into more share issues, which may be bad news for the Aston Martin share price.

Overall, the company appears to be moving in the right direction. Specifically, sales are growing and losses are shrinking. I will not, however, be buying shares today. This is primarily because I want the business to get its debt under better control. If I see positive news in terms of debt, I won’t rule out a purchase in the future. 

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Andrew Woods has no position in any of the shares 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.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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