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Why I’m watching the Aston Martin share price this week

Image source: Aston Martin

While Aston Martin (LSE: AML) cars are highly prized objects, the same isn’t always true of the automaker’s shares. The Aston Martin share price has sometimes moved fast, but not necessarily in the desired direction.

After a rough couple of years, shareholders who bought into the 2018 offering continue to nurse losses. Recently shares have picked up somewhat, increasing 15% since the beginning of this year and doubling since October. However, they are still down over the past 12 months.

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I expect the share price might move again in coming days. Here’s why.

Full-year results

On Thursday morning, the company is scheduled to release full-year results to the market. Arguably, this ought not to impact the shares much. After all, we have already had results for three-quarters of the year so in broad terms know roughly what to expect.

But the company has generated a lot of headlines over the last few months. From its share dilution as part of using some Mercedes-Benz technology to its marketing involvement in motor racing, there has been a lot for shareholders to absorb. I wouldn’t be surprised if that continues in the full-year results.

The chief executive took up his role in August and has set out an aggressive approach to righting the challenges faced by Aston Martin. The full-year results presentation would be an obvious opportunity to set out management’s current thinking and what it could mean for the Aston Martin share price.

It will also be interesting to see how sales are holding up. The storied brand launched its first SUV, the DBX, last year. Full-year sales data will be pored over by analysts. It’s not only important what stock is put into dealerships, but also what demand has been from buyers. So far there have been some promising signs, such as a high level of interest in China. The results will be hard evidence of whether the DBX programme will deliver. That matters because the company has a lot riding on its success, having built a new factory in Wales especially for the DBX.

Why the Aston Martin share price doesn’t attract me

I continue to feel that Aston Martin shares do not match my personal risk appetite. It is true that the shares have gained sharply recently. If the results on Thursday are better than expected, they could continue their ascent. However, the long-term struggle facing the company remains the same. It still needs to show that it has a viable, profitable plan for producing cars enough customers want.

Its financial difficulties to date have led to a huge dilution in shares. It also added a lot of debt to its balance sheet last year. It is being charged double-digit interest on the debt it agreed last year. Not only is that a sign of its perceived risk, it will also weigh heavily on results. Even if the DBX programme is a major success, the company will need to spend tens of millions of pounds a year just to service its debt. That could hurt the Aston Martin share price in future.

On Thursday I’ll be looking for sales data and financial news, especially on the balance sheet. If the news is good, the shares may jump – but I won’t be buying.

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christopherruane 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.

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