If I wanted to invest in a British carmaker, I wouldn’t have many options these days. Among companies listed on the FTSE 100 and FTSE 250, only Aston Martin (LSE: AML) fits the bill. Its share price is down a staggering 95% in only a few years. At first glance, that seems like a bargain for such an iconic name.
Not only can I watch the brand’s cars in every James Bond blockbuster – great exposure for the company – but I’ve been able to watch it enjoy unexpected success on the Formula 1 track.
These aren’t just empty talking points either. The company estimates that the Formula 1 partnership has added £400m to its valuation and increased the percentage of customers new to the company to 60%.
And Fernando Alonso’s back-to-back podium finishes under the Aston Martin brand have helped propel the firm’s share price from 91p to 213p.
I’d like a 140% increase in value in any conditions, but it looks especially good in a period when the rest of the FTSE 250 is up around 5%.
But before I race to pick up a few shares, these recent successes are hiding a chequered history.
A flop at IPO
Aston Martin went public in 2018, and I might consider myself being generous if I described the IPO as a flop. The offering saw the company come in at a market value £1bn less than the proposed £5bn price tag.
The CEO at the time was defiant, saying: “I don’t think we’ll worry about what the shares are doing initially. We’ll always look over the longer term.”
The long term hasn’t been too kind either, however, with the share price dropping from £20 to 94p and a valuation that fell all the way from £4.3bn to £1.5bn.
Those above figures not quite matching up shows how the company issuing tons of new shares would have destroyed my equity if I had a position. I can’t ignore the possibility that this might happen again.
And another issue if I wanted to pick up some shares today is profitability, with losses of £76m in 2021 widening to £142m in 2022.
That said, 2022 full-year revenue was £1.4bn, up from £1.1bn in 2021. That’s a lot of revenue for a total company valuation of £1.5bn.
Am I buying?
As Aston Martin celebrates its 110th anniversary this year, the big question for me is whether the company can turn those billions of revenue into healthy and consistent earnings.
That’s not an easy thing to do though, and the battered price strikes me as something of a value trap. Just because it’s down 95% doesn’t mean there isn’t further to fall. I only need to look at the carmaker’s seven bankruptcies to see that.
I think I’ll be watching from the sidelines rather than buying the stock myself.
