4 Reasons Why The Tata Motors Shares Is A Value Pick?

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Shares in Tata Motors were up once again with the stock gaining another 1 per cent today, thus jumping almost 20 per cent in a span of 10 days.

On Sept 29, the stock hit a 52-week low of Rs 279, but, has now rallied to Rs 340 in a span of just 10 days.

In fact, the stock has fallen from 52-week highs of Rs 605, which is a near 90 per cent crash.

4 Reasons Why The Tata Motors Shares Is A Value Pick?
Tata Motors: Quotes, News
BSE 534.75BSE Quote8.55 (1.60%)
NSE 534.85NSE Quote8.55 (1.60%)
The one and only one reason for the crash was faltering growth rates in China, which is the largest market for the company's Jaguar Landrover (JLR) range.

Investors dumped the stock on growth rate worries in China. However, recent data suggests that JLR sales jumped in the United States, thus, boosting prospects for the company. Here are 4 reasons why the Tata Motors shares is a value pick.

Reason 1

Many analysts believe that the stock is highly undervalued at the current levels with a price to earnings ratio of just around 7 times its FY 2016-17.

This is relatively low for a company that has solid brands like Jaguar Landrover. In fact, Maruti Suzuki is trading at p/e multiple of 30 times, which makes it very expensive compared to Tata Motors.

Reason 2

Another positive for Tata Motors could be the fact that its commercial vehicle business could do well, if economic recovery gathers steam. Presently, the business has been a drag on the company's profits.

Reason 3

The recent problems of the diesel emission scandal at Volkswagen could lead to Tata Motors' Jaguar Land Rover range benefiting immensely in the global markets of Europe, US and China. It could capture market share of Volkswagen.

Reason 4

Recently, Jaguar Land Rover unveiled several new exciting models at the Frankfurt International Automobil-Ausstellung. These included the all-new Jaguar F-PACE and the Land Rover Discovery Sport Dynamic. The spate of new launches is expected to boost sales of the company.

All in all, it still seems that shares of Tata Motors are undervalued. A gradual economic recovery in India and steady Chinese growth could augur well for the company and the stock.

GoodReturns.in

Read more about: tata motors, jlr
Story first published: Thursday, October 8, 2015, 10:14 [IST]
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