I’m often on the lookout for stocks that I believe will boost my wealth and holdings. In this case, I’ve decided FTSE 250-incumbent is one stock I’m staying away from, at least for now!
Here’s why.
Bond… James Bond
I doubt many people need an introduction to the car maker. However, for the uninitiated, Aston Martin is one of the most iconic luxury car makers in the world. Perhaps one of its biggest claims to fame is the fact the cars have been used regularly in the hugely popular James Bond films across many decades.
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From an investment view, Aston Martin shares haven’t had a great time of things in recent years. Since floating, the shares are down a mammoth 95% from 3,629p in 2018, to current levels of 151p.
Over a 12-month period, the shares are down 54% from 329p to current levels.
Why I’d stay away
On the surface of things, my reasoning is pretty clear. I’ll break it down to internal reasons and external reasons. By internal, I mean company issues and fundamentals, and by external, I mean issues outside of its control.
To start with, Aston Martin’s balance sheet is in a bit of a mess right now. This is a key indicator to me, as it can tell me how the business is performing, and if there is potential for shareholder value moving forward. The business has a mountain of debt to contend with.
Next, performance in recent years has been desultory. In fact, the business has been loss-making for a number of years now. This has been linked to capacity issues, as well as sales and competition. Naturally, the economic climate, and pandemic of a few years ago, didn’t help.
Speaking of external issues, high inflation and global economic issues have hurt the business. Less production, as well as cost-of-living crisis, has hurt sales and performance. So these external issues are ongoing risks I’ll keep an eye on.
Finally, the business has staved off bankruptcy multiple times in recent years, which is rarely a good sign.
Positives to bear in mind
Although I’m not planning on buying Aston Martin shares imminently, I’ll keep an eye on them. Plus, there are some potential positives that indicate a recovery could be on the cards.
Reviewing performance in the past few years, I can see revenue has been increasing, losses have been decreasing, and debt levels have been coming down. If economic issues subside, and leadership can continue on a positive trajectory, greener pastures could be ahead.
The other thing I must take into account is the firm’s iconic status in the automotive industry, as well as rich history. The sheer brand power of Aston Martin is not to be sniffed at, and could help aid any recovery moving forward.
Right now, I’m not convinced there’s a buying opportunity, although others may be. I’ll watch intently from the sidelines and keeping up to date. If another opportunity arises when things look rosier, I may revisit my stance.
