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Value Drives Nissan
02/03/2015 12:00 am EST
This company is a classic value idea; the company, founded in 1933 and based in Tokyo, designs, produces, and sells passenger cars and commercial vehicles in 190 countries, notes J. Royden Ward, editor of Cabot Benjamin Graham Value Investor.
In March 1999, Nissan Motor (NSANY) and Renault signed an alliance agreement and began setting up joint projects covering most of both companies’ activities. Nissan owns a 15% stake in Renault and Renault holds 44% of Nissan’s shares.
Nissan’s alliance with Renault created a new manufacturing approach to generate economies of scale through standardization of parts and modules. The approach is expected to reduce initial outlays per model by 30% to 40%, but the program will take several years to fully implement.
Nissan’s sales and earnings performance has been lackluster during the past several years, but management’s six-year business plan, announced in 2011, is producing noticeably better results in recent quarters.
Nissan plans to deliver an all-new vehicle every six weeks. The company’s global portfolio will have 66 vehicles and will cover 92% of all markets and segments.
Nissan’s focus on sustainable transportation mobility will continue, including zero-emission vehicles and low-emission technologies.
Sales in Europe and Japan are lagging, but car and truck sales in North America are robust. Nissan is benefiting from the strong US dollar and weak Japanese yen.
US sales set records in each of the final three months of 2014, which bodes well for fourth-quarter results and full-year 2015 sales and earnings. Also, new vehicle models and expanded manufacturing facilities will bolster sales in 2015.
Nissan shares sell at 8.3 times 2014 EPS and 0.86 times book value. The dividend, paid only in the third and fourth quarters, provides a decent 3.5% yield.
NSANY’s current price to current cash flow ratio (P/CF) is only 3.5. Shares will likely reach my minimum sell price target of $24.67 within one year.
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