Aston Martin (LSE:AML) shares have proven to be one of the worst listings in recent years. The company has failed to win over investors and now trades for just a fraction of its listing price.
Today, Aston Martin has a market-cap of just over £500m. And while that might not sound too small — after all, outside of Chelsea and Knightsbridge, they’re not common feature on world roads — the recent Porsche IPO has demonstrated how far Aston has fallen behind its peers.
Porsche shares actually climbed on their debut in Frankfurt despite the fairly negative investment climate. The German stock now has a market-cap of €75bn. The gap between the two firms is unbelievable and, arguably, more broadly demonstrates the decline of British manufacturing.
This is hard to believe
So if I had invested in Aston Martin shares three years ago, today I’d be very unhappy. In fact, over the 36 months, Aston Martin stock has fallen a staggering 96.7%. As a result, if I had invested £1,000 three years ago, today I’d be left with just £33. That is a phenomenal loss.
The share price has been hit by several issues. The pandemic, of course, was not good for sales and particularly in high-growth markets such as China, where economic growth is also slowing.
The iconic brand has failed to deliver the growth that chief executive Lawrence Stroll had hoped for. The company has registered loss after loss and net debt continues to grow. The company reported a pre-tax loss of £285.4m in the six months to June 30, compared with a loss of £90.7m a year ago.
In September, the firm launched a £575.8m rights issue as part of an effort to pay down debt and support future growth.
A diamond in the rough?
Debt and slow growth are the big challenges here. The company has a £1bn debt burden costing around £130m a year in interest payments.
And that put a lot of pressure on the company to sell more just to cover interest repayments. However, Aston only sold 2,676 vehicles in the first half of 2022, so it’s a long way behind Stroll’s lofty plans for 10,000 sales per year.
Aston had pinned its hopes on the Chinese market, but the country has experienced lockdowns and slowing economic growth this year. Moreover, there have been been supply chain issues that have further complicated its growth objectives.
Aston does not expect to be in positive cash flow until at least 2024. And that’s going to require a pretty serious turnaround.
However, there are several reasons to be optimistic. The most recent raise should help bring debt levels down. And, assuming supply chain issues can be dealt with, I’m confident there is more than enough demand for 10,000 new Aston Martins a year — I genuinely don’t think another supercar company comes close on elegance. Moreover, I see huge potential in the DBX range.
With a new former Ferarri boss onboard, I expect the firm to improve its margins and really enter the 21st century with non-petrol offerings. Investing in Aston is clearly risky, but with the share price so heavily discounted, I’d be happy to take a chance.
