Could Aston Martin enter the FTSE 100?

Dr James Fox explores whether Aston Martin could eventually be a constituent of the FTSE 100 index, and discusses whether he’ll buy more of the stock.

| More on:

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.

Father working from home and taking care of baby

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Aston Martin (LSE:AML) has never been in the FTSE 100 index. The car builder was close to the threshold at its launch in 2018, but the share price fell, and then fell even more.

The British marque was worth £4.3bn when its shares starting trading on the stock market in October 2018 at £19.

However, the stock has fallen massively since its IPO. At the time of writing, it trades for just £2.17. And that’s after positive results sent the shares surging upwards this week.

So, let’s take a closer look at Aston Martin, and explore whether it could ever make the blue-chip index.

Lofty targets still out of reach

Businessman and executive chairman Lawrence Stroll has ambitious plans for the iconic car brand. He previously said that he wants to increase production to 10,000 cars per year by 2024/25, up from 6,600 in 2021.

By focusing on the ultra-luxury market as well as the DBX SUV, the chairman wants to achieve £2bn in revenues and £500m in adjusted EBITDA by 2024/25. 

However, Aston is still some distance away from Stroll’s targets. In the 12 months to 31 December, revenue rose to £1.38bn, up from £1.09bn. The firm posted a £495 loss before tax, while net debt fell to £765.5m from £891.6m a year before.

A weak pound, partially engendered by Liz Truss’s mini budget, contributed to losses as debt repayments climbed. Its debts are held in dollars and a tumbling pound has made the interest costlier. 

Turning point?

Q4 was positive with the iconic car maker turning a profit. The company made a narrow operating profit of £6.6m in the final three months of the year. This was achieved largely through higher average selling price for its cars. In Q4, Aston achieved an average selling price of £184,000, up from £152,000 last year.

These results were greeted favourably by investors as the share price jumped as much as 15% in early trading.

Investors will have been buoyed by further commentary too. Aston has been chasing higher margins for some time, and appointed former Ferrari boss Amedeo Felisa as CEO last year — Ferrari margins are the envy of all car builders.

Aston said its next generation of sports cars and limited edition luxury cars will have profit margins of 40%. As such, the Warwickshire-based business expects to hit its 2025 target with sales of just 8,000 cars a year, down from Stroll’s 10,000 target. In 2022, it sold 6,412 vehicles.

Should I buy Aston stock?

Well, I already hold stock in the carmaker. However, and this may surprise some, I’m looking to buy more. I’m very encouraged by this week’s data and the commentary — finance chief Doug Lafferty said he was “very confident” of meeting 2025 goals.

Joining the FTSE 100? Well, it would require the share price to more than triple. It’s not impossible, but it seems unlikely in the next couple of years, particularly with fairly poor market sentiment towards the firm. But if EBITDA of £500m is achieved, a £4.5bn valuation would not make it expensive versus the rest of the index.

Finally, I appreciate this is speculation, but perhaps a strong performance from the Aston Martin F1 team this year — and they’re looking good — could positively impact sales from the increasingly-US focused sport.

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 assessed. Consider taking independent financial advice.

James Fox has positions in Aston Martin Lagonda. 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.

More on Investing Articles

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »

Investing Articles

Down 47% in 5 years, is the IAG share price due a bounce?

Many companies in the travel sector have seen fierce rallies since 2020. But with the IAG share price still down…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer's has been falling. Despite this, she’s…

Read more »

Investing Articles

AI stocks vs EV shares; which is the best sector for me to invest in?

Jon Smith considers the recent rally in AI stocks and weighs up whether to allocate more money there versus EV…

Read more »

A graph made of neon tubes in a room
Investing Articles

Do Greggs shares have even more growth ahead?

Greggs shares have seen some solid growth in the last few months, as the economy shows positive signs. But is…

Read more »

Investing For Beginners

How I’d aim to grow my Stocks & Shares ISA from £20k to £1m

Jon Smith explains how diversification and focusing on sectors for the future can help grow his Stocks and Shares ISA.

Read more »