ALD remains under-valued on Paris stock market

In 2017, Société Générale decided to put around 20% of ALD capital on the market. The first quotation of the company was at 14,3 euros per share and grew to a maximum of 16,3 in 2018 to fall down to 7,9 in 2020

In 2016, ALD consolidated net results reached 511 million euros and remained relatively stable for the following 4 years (567, 555, 564, 509 million) in a context of falling margins on used car sales, slow growth and increasing current revenues.

2021 has been exceptionally good with 873 million after tax and 2022 promises to be even better with 918 million at the end of Q3 (+51% on 2021). Once again, the performance relies mainly on used car sales profits in a context of cars and microchips scarcity leading to high prices on used car market.

December 5, share price were at 10 euros which correspond to a PER (price earnings ratio, i.e., net result/company valuation) of 4. This is low if compared to Société Générale (PER 9,5), Renault, Total or BNP (PER around 7 for all 3), and far from Tesla (PER of 56)

There are two reasons for that situation:

1. First, poor liquidity as only 20% of equity is on the market.
2. Second, used car margin volatility which explain most of the fluctuation of results.

Share rights given to existing shareholders for the on-going capital increase will allow them to buy new shares at 7.5 euros, i.e., 25% discount before dilution which is certainly a good opportunity.

For the medium/long term, the merge with LeasePlan should contribute to enhance liquidity. We can also expect savings from restructuration (economies of scale) over time and some improvement on financial margins due to interest rates increases.

(This is not a financial advise or recommendation. Do you own research.)