You Will Never Find this Undervalued Stock by Looking at PE Ratios

Aug 30, 2021

Upon entering the factory compound of this electric vehicle (EV) maker, the first thing one notices is the silence.

You cannot hear loud clanks of metal getting hammered into shape. You cannot hear the screeching sound of welding. You do not even hear the sound of the paint shop.

But sound is not the only thing that makes this facility stand out from its traditional counterparts.

The factory employs just 300 people. A factory with similar capacity, owned by its parent company, producing internal combustion vehicles, employs 3,000.

How is this possible?

The answer lies in robotics and automation.

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The major functions at this new electric vehicle facility are assembly, testing and quality checks, material handling, and supply-chain management.

The assembly line is only about 100 metres long, a fraction of the same at an internal combustion facility.

The lithium-ion battery packs to be integrated into the EVs are also made in-house. The company has filed 13 patents for the design and manufacturing of the lithium batteries.

There is zero effluent generated from the factory.

So the factory is starkly different from a traditional vehicle manufacturing facility in every way possible.

But the company does not see itself as just an EV producer. Rather it has positioned itself as a technology company.

It employs a large number of 'knowledge workers'.

I believe the earnings of this company doesn't capture the massive potential the factory has in the future.

The parent company, which is listed, derives zero benefit for owning a large chunk of the shares of this cutting-edge EV maker.

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The stock of the parent company is one of the most undervalued stocks even in this heady bull market.

Most investors are completely unaware of the huge electric vehicle opportunity in the offing.

You see, the market believes the biggest automotive names are the ones to bet on in the EV space. They couldn't be more wrong.

Investors sifting through current PE multiples of stocks can never identify this hidden opportunity.

Nevertheless, StockSelect subscribers are already positioned to ride the massive EV opportunity in this underrated stock (requires subscription).

Like I wrote earlier, a few years back, the largest oil refiner, electricity producer, and combustion vehicle manufacturer were the key wealth creators.

But following the heavyweights could leave you thoroughly disappointed this time around.

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Tanushree Banerjee
Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)

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