Tata Motors, one of India’s most renowned automotive giants, has been a consistent player in the domestic and global automotive markets for decades. With a rich history and a diverse portfolio of vehicles, including passenger cars, commercial vehicles, and luxury brands like Jaguar Land Rover, Tata Motors holds a prominent position in the automotive industry.
In this comprehensive review, we delve into the recent performance and prospects of Tata Motors’ shares, exploring the factors influencing its stock price, financial health, market positioning, and the broader industry trends that impact its trajectory. Whether you’re an investor, an automotive enthusiast, or simply curious about the company’s current standing, this analysis will provide valuable insights into the world of Tata Motors’ shares.
Analysis: How Tata Motors Shares are Performing
To analyze the performance of Tata Motors shares, let’s look at various aspects:
Tata Motors Performance Report
Tata Motors’ performance showcases positive momentum across various time frames. Investors and stakeholders may find this data valuable in assessing the company’s historical growth and making informed decisions based on their investment objectives and risk tolerance. Here’s a brief report:
One-Month Performance:
In the short term, Tata Motors has experienced a modest growth of 4.07%. Short-term fluctuations may be influenced by market sentiments, economic conditions, or company-specific events.
Three-Month Performance:
Over the last three months, Tata Motors demonstrated a more substantial increase of 10.27%. This suggests a positive trend, possibly driven by improved operational efficiency, market demand, or strategic initiatives.
One-Year Performance:
Tata Motors has shown significant growth over the past year, recording an impressive 59.12%. This substantial increase could be attributed to factors such as successful product launches, cost management, or favorable industry trends.
Three-Year Performance:
Looking at a three-year horizon, Tata Motors has exhibited remarkable growth, soaring by 291.57%. This sustained upward trajectory may indicate the company’s ability to navigate challenges and capitalize on opportunities in the automotive sector.
Five-Year Performance:
Over the last five years, Tata Motors has achieved a substantial growth rate of 269.05%. This long-term perspective reflects the company’s resilience and strategic positioning in the market, adapting to industry dynamics and evolving consumer preferences.
PE Ratio (Price-to-Earnings Ratio):
The PE (price-to-earnings) ratio of 14.60 for Tata Motors suggests that investors are currently willing to pay 14.60 times the company’s earnings for each Tata Motors share. This metric is a fundamental valuation measure used by investors to assess the relative attractiveness of a stock in relation to its earnings. A PE ratio of 14.60 indicates a moderate valuation, reflecting investor confidence in the company’s earnings potential.
This PE ratio suggests that investors are willing to pay a relatively higher price for each unit of earnings generated by the company. This could be due to factors such as perceived growth prospects, market sentiment, or industry trends. A higher PE ratio can indicate that the stock is trading at a premium, potentially reflecting optimism about the company’s future earnings potential.
Investors typically use PE ratios in combination with other financial metrics and qualitative analysis to gain a comprehensive understanding of a company’s investment attractiveness and to make informed investment choices.
EPS (Earnings Per Share) – TTM (Trailing Twelve Months):
The trailing twelve months EPS of INR 46.15 for Tata Motors signifies that, on average, the company generated INR 46.15 in earnings for each share over the past year. This key profitability indicator reflects positively on Tata Motors, showcasing its ability to generate significant earnings relative to the number of outstanding shares.
It’s important to note that higher EPS figures are generally considered favorable, as they indicate stronger profitability on a per-share basis. However, when evaluating a company’s financial health and investment potential, it’s essential to consider EPS in conjunction with other financial metrics and industry benchmarks.
Market Capitalization:
Tata Motors’ market capitalization of INR 2,23,824 cr highlights its substantial presence in the stock market. This metric, derived by multiplying the current market price per share by the total number of outstanding shares, provides insights into the company’s size, investor confidence, and liquidity.
Market capitalization provides several insights:
Size: It reflects the company’s size in terms of its presence in the stock market. Larger market capitalization generally implies a larger company.
Investor Interest: It can indicate the level of interest and confidence that investors have in the company’s prospects. Higher market capitalization often suggests greater investor confidence.
Benchmarking: Market capitalization allows investors and analysts to compare companies within the same industry or sector.
Liquidity: Larger companies with higher market capitalization often have more liquidity in their stocks, making it easier for investors to buy and sell shares.
It’s important to note that market capitalization can fluctuate based on changes in a company’s stock price and the number of outstanding shares. It’s one of the key metrics that investors consider when assessing the investment potential of a company, alongside other financial and qualitative factors.
Tata Motors’ Classification as a Large Cap Company:
With a market capitalization of INR 2,23,824 cr, Tata Motors is classified as a large cap company. Large cap companies are typically considered more established and prominent players in the market, enjoying greater investor interest and confidence.
It’s important to note that market capitalization thresholds for large-cap, mid-cap, and small-cap classifications can vary between different financial institutions and index providers.
PB Ratio (Price-to-Book Ratio):
The PB ratio of 4.01 for Tata Motors indicates that the stock is trading at 4.01 times its book value. This valuation metric suggests that investors are willing to pay a significant premium for each unit of the company’s net assets. It’s important to interpret this in the context of market sentiment, growth expectations, and other qualitative factors.
In the case of Tata Motors, a PB ratio of 4.01 suggests that the stock is trading at a significant premium compared to its book value. This could indicate that investors are willing to pay more for each unit of the company’s net assets. A higher PB ratio often suggests that the stock may be overvalued, which may be due to factors like market sentiment, growth expectations, or other qualitative considerations.
Conversely, a lower PB ratio is often interpreted as a potential value indicator, suggesting that the stock may be undervalued compared to its book value. However, it’s important to note that the interpretation of PB ratios can vary between industries and companies, and a low PB ratio may also indicate concerns about the company’s financial health or future prospects.
Investors typically use PB ratios in conjunction with other financial metrics and qualitative analysis to make informed investment decisions. It’s important to consider the broader context and perform a comprehensive analysis of the company’s financials and market conditions before drawing conclusions based solely on the PB ratio.
Beta:
A beta of 2.09 for Tata Motors indicates that the stock is more volatile compared to the market average. Beta is a measure of a stock’s sensitivity to market movements, specifically to the benchmark index against which it is compared. In this case, a beta of 2.09 suggests that Tata Motors’ stock tends to experience price fluctuations that are approximately 2.09 times as volatile as the broader market.
Here’s what the beta values typically imply:
- A beta of 1.0: Indicates that the stock tends to move in line with the market. It’s considered to have average market risk.
- A beta greater than 1.0 (ex: 2.09): Suggests that the stock is more volatile than the market. It tends to have higher price swings, both upward and downward, in response to market movements.
- A beta less than 1.0 (ex: 0.75): Indicates that the stock is less volatile than the market. It tends to have smaller price movements relative to the market.
- A beta of 2.09 implies that Tata Motors’ stock can be significantly influenced by market trends, economic conditions, and industry-specific factors. Investors should be aware of this higher volatility when considering the stock for their investment portfolio. Higher-beta stocks have the potential for greater returns but also come with increased risk, as they can be more susceptible to market fluctuations.
In conclusion, Tata Motors presents an investment opportunity with a moderate PE ratio, reflecting reasonable investor confidence. The substantial EPS and large market capitalization indicate the company’s robust financial standing. However, the relatively high PB ratio and elevated beta suggest potential risks, urging investors to carefully assess their risk tolerance and conduct thorough analysis before making investment decisions.
How has Tata Motors Stock Performed in the Past Few Years
One has to analyze the overall performance of the company in the past years to assess the performance of its stocks in the share market. An estimate of just the performance of the stock for the past few months may not offer the right picture to understand how the Tata Motors stock has performed. Here’s how the stock has fared:
Historical Price Decline:
The historical data shows that, on average, there has been a price decline of approximately 10.53% within seven weeks of the Weekly MACD crossover signal over the past 10 years. This suggests that while the crossover may indicate a change in momentum, it has been followed by short-term price declines in the past.
It’s important to note that technical indicators like the MACD crossover are one of many tools used by traders and investors to make decisions. They provide valuable insights into short-term price movements but should be considered alongside fundamental analysis and other factors.
Past Few Years:
When we look at the past performance of the company we see that the share price increased by 365.63% in the last three years. We are going to understand it in steps:
Face Value: The face value is the most important thing to understand the performance of a share. This is the original price of the share and in Tata Motors’ case it was INR 2.
2018: In this year the price of the share rose to 443.50 on Jan. 9, and it did not go any further. By the end of the year, the prices came down to INR 154.
2019: The price dropped even lower and the maximum price of the share was INR 239.35 on April 22, but the prices kept on falling and as on Dec. 31, it was INR 201.70.
2020: This is the time when Covid spread worldwide and Tata’s subsidiary, JLR, got affected by it owing to dependency on China for supplies. The stock price rose to INR 197 in January as Covid-19 spread, it went into a free fall with the stock crashing down to INR 63.50 by March. This was the lowest point after which the stock picked up but was not able to cross INR 187 in the same year.
2021: It was again a tough year as the price was INR 184 in January. With most of the countries under lockdown, the Tata Motor share was recovering and was able to get back to the price of INR 536.70 by November after a few years.
2022: This year, the price rose to INR 588 on the BSE and INR 528.50 on the NSE and since then it has stayed above INR 400. The lowest price was INR 381.
Historical High: Tata Motors’ share has reached a historical high of INR 1,382 in December 2010.
Historical Low: In April 2001 this stock saw an all time low price of INR 57.55.
Dividend: Company has not announced any dividend recently. The last dividend was announced in the year 2016.
What Makes Tata Motors’ Stock Interesting?
Despite challenges posed by the semiconductor shortages worldwide that dented profits for companies, specifically in the locomotive space, across the world, the Tata Motors Group was able to record a growth of nearly 60% in sales last financial year (FY). Here are other key aspects that make the Tata Motors stock interesting:
Investment in Technology
Tata Motors has spent INR 15,339 cr on research and development operations in the financial year 2022. This is 5.5% of the total turnover the company had. This is a heavy investment for R&D and quite unlike its peers out of India.
It is a known fact that only those companies will be able to survive in the world of technology that are able to evolve and adopt new technologies. Tata as a company is also shifting its focus to the new-age technologies that are interesting for consumers. Based on their their annual report, these include:
i) Energy Transition – irreversible move to green mobility.
ii) Supply Chain Transition – rebalancing of supply chains to become resilient.
iii) Digital Transition – artificial intelligence and machine learning becoming mainstream.
iv) Talent Transition – coming of age of the talent cloud: a diverse, inclusive, global talent pool that can be accessed remotely.
The company aims to bolster its production and revenue as each of the focused investments in the field of technology reaps results.
Electric Vehicles (EVs)
EVs are the most promising segment for Tata Motors given the fact that the company enjoyed a market share of 87% for EVs in India in FY2022. This has grown by 1% in the first quarter of the financial year 2023. In the first quarter alone, Tata Motors sold 9,301 EV units with no signs of decline.
Orders:
Tata Motors has orders for the manufacturing of commercial vehicles from various State Governments in India:
- 1500 electric buses for Delhi Transport Corporation.
- 1,180 electric buses for the West Bengal Transport Corporation.
- 921 electric buses for Bengaluru Metropolitan Transport Corporation.
Delivery of these orders has already started and the company has set up charging stations throughout the country.
Charging Stations
There are over 3,600 public or semi-public chargers and more than 23,500 residential chargers throughout the country. They are planning to set up 5,000 new stations in new construction projects in the state of Maharashtra.
Foreign Investments
Tata Motors is consolidating its home base, India, and helped by an increase in liquidity amid investment by foreign companies and collaborations for India, Tata Motors no longer wants to remain listed in the American market and has delisted its American Depositary Shares (ADRs).
Tata Motor’s expansion with partners includes:
TGP investment in Tata Motors for the manufacturing of electric vehicles:
Stellantis has partnered with Tata Motors to produce automotive components and branded vehicles. Fiat also has a manufacturing plant in India with Tata Motors.
It has joint ventures and assembly operations in Kenya, Bangladesh, Ukraine, Russia, and Senegal. They have dealerships in almost all major countries.
Risks Related to Tata Motors’ Stock
Risky Investments
Tata Motors has invested a considerable amount of money in purchasing Jaguar Land Rover, and the business is yet to showcase its full potential. The company’s investment in establishing Tata Motors European Technical Centre is expected to become fruitful in the coming years, and currently requires continued investment.
The failure of Tata’s flagship low-cost car Nano is also a bad investment, the brunt of which the company has had to bear through the years.
Debt
The company had a debt of INR 57,000 cr in the third quarter-ended December 2022. The company has shown its commitment to lower its debt, and targets to pay all of it by 2024.
The company’s profits can not be the only factor to determine the strength of the Tata Motors stock given how established the automobile giant is. Profitability of a company depends on a lot of factors and here are some factors that make Tata Motors promising for shareholders.
Global Risks
Covid-19
Covid-19 was a big disaster for businesses globally and it affected the auto industry in India to a large extent. Production was lower and sales were severely affected for more than a year. Tata Motors has also had to wither its after effects.
Geopolitical Reasons
Because of the slowdown in the European economy, Jaguar Land Rover has not been able to reach its targeted sales. The semiconductor supply chain breakdown fueled by constant lockdowns in China hampered production and has led to shortages of important parts needed to scale production.
All About Tata Motors
Tata Motors, one of the pioneers of the automobile revolution in India, was established in 1958. Even in those days, there were many Indian companies in the market, but only two companies were able to retain their dominant position domestically; in fact they were also able to extend their businesses and manufacturing plants internationally. These companies are Mahindra & Mahindra and Tata Motors.
Since its inception, Tata Motors has collaborated with some of the world’s best and at the same time acquired some in the process of global expansion.
Following are the international companies acquired by them:
Products and Services by Tata Motors
Tata Motors was the first Indian company to indigenously develop automobiles for the Indian market. Before that companies were dependent on imports for the manufacture of primary components. They developed the needed technology and brought modern innovations into manufacturing.
Cars
Last year alone, Tata Motors had a line up of some of the best-selling cars in the country across the electric, luxury and SUV segments. Among their top car brands include Tata Tiago, Tata Punch, and Tata Nexon for electric, luxury cars like Jaguar Land Rover for the international and Indian markets and Tata Harrier as an SUV.
Commercial Vehicles
Tata Motors manufactures trucks, pick-ups, construction, light mining, and services vehicles. Among some most popular names is the 407 model range for trucks and Prima in the heavy-weight truck category.
Research
Tata Motors has various production facilities in India and internationally. In 2005, they set the foundation of Tata Motors European Technical Centre—an engineering and research company based at WMG, University of Warwick (UK).
Bottom Line
Despite Tata Motors shares on a rocky footing due to multiple underlying issues, the company’s stock remains one of the most trusted automotive stocks in the country. Standing on the robust foundation of its parent company, Tata Motors’ investments are forward-looking and the company has wide scope of further growth in new-age locomotives, which aligns with the interest of the federal government as well.
For investors who are looking to trade in Tata Motors stocks, it is advisable to do so by comparing peer stocks and the Auto Index along with the market indices via online aggregators or stock market advisors to make a fruitful decision.
