Toyota Motors (NYSE:TM) is the largest automotive manufacturer in the world. It is also one of the 10 largest companies in the world. The auto sector has battled significant headwinds on a global scale.
Some of these include highly leveraged consumers, slowing global growth, and a damaging trade war. Toyota has managed to thrive in the face of these challenges.
The company released its second-quarter fiscal 2020 results on November 7. The Japanese giant posted an operating profit of $6.09 billion in the quarter, which was up 14.4% from the previous year.
This also beat analyst estimates. These earnings followed profit warnings from some of the largest automotive manufacturers in the world, including from Ford (NYSE:F), Subaru, and Mazda. This was primarily due to slowing sales in United States and Chinese markets.
A fantastic earnings report was followed by the announcement of a $1.8-billion share buyback, which bumped up Toyota’s stock to all-time highs. Shares have now climbed 24% in 2019 as of close on November 8.
Toyota also announced a 50-50 joint venture with Chinese carmaker BYD to research, develop, and design battery-powered electric vehicles. Investors can expect to see major manufacturers push hard into the EV market over the next decade.
Should investors consider adding Toyota at current price levels? The stock possesses a price-to-earnings ratio of 10 and a price-to-book value of 1.1, which are both still favourable relative to its peers.
However, shares last had an RSI of 78, which puts it well into technically overbought territory. I like Toyota going forward, even in the face of broader headwinds, but prospective buyers should wait for a better entry point before looking to add the stock to their portfolio.
