Shares of Tesla (NASDAQ: TSLA) have been on the mend over the past year, up more than 142% year to date. Now, Elon Musk’s electric vehicle (EV) firm is worth a substantial premium over the peer group. However, at current levels, it’s tough to justify paying up over 74 times trailing price-to-earnings (P/E), especially if the economy falls into a downturn at some point over the next 12 months.
Indeed, Tesla is synonymous with EVs. But don’t think that other automakers won’t be playing catch up as they look to electrify their fleets.
Tesla stock looks way too hot to handle after its hot run
For now, I view Tesla as a high-risk/high-reward type of play that only the most courageous of investors should hang onto. After more than doubling in less than a year, however, I think it’s only wise to take some profit off the table. By lightening up and pursuing better value options, investors may be able to steer clear of what could be a steep pullback.
Of course, Tesla stock is no stranger to big drops. At this juncture, I’d argue another one is overdue at some point over the coming weeks. Tesla is not the only hot EV play to consider. Here in Canada, there are intriguing options that can benefit from the secular rise of EVs.
For instance, Magna International (TSX: MG) is an auto-part maker that will play a key role in helping supply EV manufacturers with critical components. The stock is so much cheaper than the likes of Tesla and could be better able to weather a downturn better than the likes of the bid-up shares of Tesla.
Magna International
Magna stock is down around 5% year to date, while Tesla has more than doubled. Clearly, Magna is feeling the macro headwinds. And though the firm could be hit with another few rough quarters, I’m incredibly encouraged by its latest Investor Day meeting, which noted potential growth to be had from the electrification of vehicles.
As more EVs hit the roads, more Magna parts will be needed. If a recession does hit, I view Magna as a stock in hibernation. It won’t stay hibernated forever, though. Auto cycles tend to turn very quickly, making it hard to catch a bottom.
The stock trades at just shy of 17 times trailing price-to-earnings (P/E) at writing. With a 3.28% dividend yield, shares seem incredibly undervalued given the EV boom that could return to the driver’s seat in as little as a few quarters.
NFI Group
NFI Group (TSX: NFI) is a deep-value stock that’s shed nearly 80% of its value from peak levels. The bus maker is behind electric buses that could be in high demand as cities look to cut emissions. Through the years, the company has suffered operational setbacks. And the damage has been reflected in the huge downside move. Year to date, things are looking up, with shares up just north of 28%.
Though NFI is a very volatile mid-cap stock, I still think it’s a worthy buy for investors seeking next-level value. The stock trades at 2.2 times price-to-book (P/B) and 0.3 times price-to-sales (P/S). That’s super cheap!
