Fiat Chrysler Automobiles N.V. (NYSE: FCAU) has recently seen a run-up for the past year. It has come from a merger with General Motors Inc. (NYSE: GM) and PSA Group (PEUP: PSA), with analysts pointing to a potential merger between FCAU and GM. Notably, FCAU has not seen much action since inception regarding price action and has recently seen an increase in interest from investors. Although the stock has already pushed higher, there is still plenty of room for significant returns. My reasoning is that FCAU is still considered to be an undervalued asset, and with a recent analysis of its financial statements, I can see subtle improvements in the company’s performance in regards to operations, generating revenue, and most importantly increasing free cash flow.
In another article by Anton Wahlman, he stated that FCAU’s growth outside of the U.S. is growing at a rapid pace. He provided a chart to show the latest growth by country to get a better illustration of the growth. The recent merger between GM and PSA is primarily due to GM is growing overseas. Now that FCAU is showing similar strength in international regions, the possibility of a merger with FCAU and GM can be high. Analysts were quick to jump to the conclusion that FCAU could be a target for a potential merger and is the reason for the most recent rise in the stock price. Furthermore, the CEO of FCAU has left the door open for a possible merger and has advocated for it more than once. Due to GM’s new synergy, we could expect its merger process to be swifter since it has just recently gone through a similar merger. If this synergy were to occur, the stock price of FCAU would rise. However, excluding the possible merger, FCAU is showing strong progress in increasing performance in the last year. The company by itself seems to have enough weight to hold its ground and enhance the value of the company on its own.
Earnings and Income:
Firstly, let’s go over how the company has been producing revenue and how much it retains after over a period of time to see if we can find any sentiment that may show us improvement. The EV-to-EBITDA for FCAU is at 2.42 and when compared to its industry, it is 95% stronger over 931 companies in the global auto-manufacturing industry. Many aspects of the company’s financial statements are having growth year over the year such as net income, gross revenue, revenue, and earnings per share. I feel that the most important financial number is the gross income for FCAU. It allows an investor to get a better outlook of its operations and how management is handling efficiency. Overall, the business is beginning to pick up while showing signs of recovery.
