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Aston Martin shares fall 18% in 3 months. Should I buy now?

Image source: Aston Martin

My all-time favourite James Bond actor is the late, great Sir Sean Connery. But secret agent 007 originally drove a Bentley, not the Aston Martins usually seen in the spy films. (Furthermore, Bond used to smoke up to 70 bespoke Morland cigarettes a day, but that’s also history!) However, since Aston Martin Lagonda Global Holdings (LSE: AML) returned to the stock market in 2018, Aston Martin shares have zig-zagged more than Bond’s iconic DB5.

Aston Martin’s troubled history

Founded in 1913, Aston Martin has been around for 108 years. But it’s been a rocky ride for AML’s owners from the start. Indeed, the first of seven bankruptcies occurred in 1925, just 12 years after the group’s launch. In 1972, the struggling company changed hands for a mere £101. In 1975, it was sold for £1m, before being acquired by new owners in 1981. Ten years later, Ford took majority ownership of Aston Martin and modernised the firm’s line-up. It was sold again in 2007, a year after Daniel Craig became the new Bond. Over these decades, owners of Aston Martin shares usually ended up with nothing or a token payment for their stock.

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Aston Martin shares list in London

In October 2018, Aston Martin shares listed in London for the first time. This valued the group at £4.3bn, £800m below the hoped-for £5.1bn. The stock fell 90p (down 4.7%) on its opening day and then headed steeply southwards. So much for the first London listing of a UK carmaker since 1984.

Within 14 months of floating, Aston Martin shares had lost more than nine-tenths (91.2%) of their value. Then along came the Covid-19 pandemic, savaging the company’s sales. Aston Martin appeared to be heading for its eighth bankruptcy. But a group of investors led by Canadian billionaire Lawrence Stroll rescued AML. They paid £182m to acquire a quarter of the group and injected much-needed funds to strengthen the business.

AML stock skyrockets over 12 months

Just over a year ago, on 14 May 2020, Aston Martin shares crashed to an intra-day low of 550p and later closed at 614p. But AML’s stock has exploded since then, delivering bumper returns to brave (or lucky) investors. At the end of 2020, AML closed at 2,009p, more than triple (+227%) May 2020’s closing low. This climb peaked at a 2021 closing high of 2,273p on 2 February.

Would I buy AML today?

Although Aston Martin makes beautiful cars, its financial history has been very ugly. However, in first-quarter results released on Thursday, the group revealed revenues of £224m, up 153% on Q1 2020 (when Covid-19 was spreading worldwide). The quarterly pre-tax loss narrowed to £42m, from £110m a year earlier. And net debt fell to £723m from £956m 12 months before. On Friday (7 May), Aston Martin shares closed at 1,856.5p, down 34.5p

As a veteran value investor, before I acquire a stake in any company, I ask myself a simple question: had I sufficient funds in cash, would I be willing to purchase the entire business today? For AML, the answer would be a firm no. Although the group is clearly turning a corner, the current market cap of £2.1bn is too rich for my blood. For now, I’ll leave Aston Martin shares to more optimistic growth investors.

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Cliffdarcy 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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