Indeed, at the time of writing, shares in the carmaker are changing hands at around 1,890p, which is significantly below the company’s IPO price of 10,914p. These figures take into account the group’s recent share consolidation.
However, past performance is no guarantee of future potential, and just because shares in Aston Martin look cheap compared to history, does not necessarily guarantee strong long-term potential.
Aston Martin share price outlook
The luxury carmaker has made a string of mistakes over the past few years. It failed to match supply and demand, which led to excess production of its vehicles. It also borrowed too much money as it tried to develop new models.
As a result of these two mistakes, last year, the company was forced to ask shareholders and other creditors for more money to keep the business afloat. It has also had to write off millions of pounds of excess stock.
The company’s problems also resulted in a management exodus. Luckily, the group now has a high-quality management team on board. Chairman Lawrence Stroll and its new CEO Tobias Moers are both incredibly experienced business operators who have impressive track records in the luxury goods and car sectors.
I think this new management team is just what the business needs. However, I would not buy Aston Martin shares just yet. While the company’s outlook has improved over the past few months, it is still losing money. It also has a weak balance sheet, despite the recent fundraising.
Therefore, I’m going to sit on the sidelines and see how the company moves ahead over the next few months before considering a position.
Cheap UK stocks
Instead of throwing my weight behind the Aston Martin share price, I think other cheap UK stocks present more attractive opportunities.
For example, I think companies like Playtech, which provides the software for gambling organisations around the world, and Ibstock, a major brick producer, have brighter long-term outlooks.
Both of these companies have a competitive advantage over their competitors. Playtech is a leader in its sector, while Ibstock’s size produces strong economies of scale.
Aston Martin lacks these sorts of qualities. The group’s brand is highly regarded, but it’s not the only luxury car maker. The market is highly competitive, and it needs to work hard to maintain market share.
That’s not to say that Playtech and Ibstock are not without their risks. Rising commodity prices could put pressure on the brick maker’s margins, leading to lower profits. Meanwhile, Playtech operates in a highly regulated industry. The firm’s long-term success will always be at the mercy of regulators.
Still, compared to the Aston Martin share price, I think these UK stocks look to be the better buys. As such, I would add these companies to my portfolio today. But, I’m not in a rush to buy the luxury carmaker.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Ibstock. 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.