Poor fundamentals and the $26 level keeping Adient in check
Irish automotive supply manufacturer Adient (NYSE: ADNT) has been struggling over the past 10 months. The company manufactures seats, seat systems, and interiors for use in passenger cars, commercial vehicles, and light trucks. Its stock gapped lower last November and hasn’t been able to fully recover since then.
If we look at the daily chart for Adient we see that the stock dropped below the $26 level when it gapped down after a disappointing earnings report. After that drop, the stock has made several attempts to move back above the $26 mark but has been turned away each time. The stock gapped higher and moved up nicely on August 6 after the company reported better than expected earnings. Even with that good news, the stock was not able to break through the resistance and looks to be headed lower once again.
We see that the daily stochastic readings reached overbought territory a few days after the earnings surprise, but now the indicators have turned lower and made a bearish crossover on August.
In addition to facing technical resistance, the company’s fundamental indicators are well below average. Looking at the Tickeron Fundamental Analysis Overview we see that the “Tickeron Valuation Rating of 78 indicates that the company is slightly overvalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization.” One item in the valuation formula that really stands out is the P/E ratio at 182.
Also from the Tickeron overview we see that the Tickeron SMR rating for this company is 100, indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.
Looking at some of the stats that comprise those ratings, we see that the company saw sales decline by 6% in the most recent quarter and has only been able to grow sales by 1% per year over the last three years. The profit margin is a paltry 3.6%.
Earnings have been declining at a rate of 27% per year over the last three years and they dropped by 74% in the most recent quarterly report. Analysts expect earnings to decline by 76% for this year as a whole.
The sentiment toward Adient is extremely bearish, but given the technical picture and fundamental outlook the bearish posture appears to be deserved. There are 14 analysts covering the stock and only four have the stock rated as a “buy”. There are seven “hold” ratings and three “sell” ratings.
The short interest ratio for the stock is at 5.4 and that is above average and indicates more bearish sentiment toward the stock than the average company. There are 10.6 million shares sold short currently and that figure is down from 11.2 million at the mid-July short interest report.
The idea of contrarian investing is to find stocks with good fundamentals and in an upward trend, but where the sentiment is extremely bearish—at least for bullish trades. For bearish trades you ideally want to find stocks with poor fundamentals, in a downward trend, and have excessive optimism toward them. In the case of Adient, the fundamentals are poor, and the stock is having trouble moving past the resistance at $26. The excessive pessimism from analysts and short sellers seems to be deserved and doesn’t really present a contrarian case.
ADNT's Stochastic Oscillator sits in oversold zone for 8 days
The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an uptrend is expected.
Technical Analysis (Indicators)
Bullish Trend Analysis
The RSI Oscillator points to a transition from a downward trend to an upward trend -- in cases where ADNT's RSI Oscillator exited the oversold zone, of 24 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where ADNT advanced for three days, in of 318 cases, the price rose further within the following month. The odds of a continued upward trend are .
ADNT may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on December 12, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on ADNT as a result. In of 94 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for ADNT turned negative on December 13, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 49 similar instances when the indicator turned negative. In of the 49 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where ADNT declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for ADNT entered a downward trend on December 24, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (1.275) is normal, around the industry mean (12.167). P/E Ratio (14.314) is within average values for comparable stocks, (44.822). Projected Growth (PEG Ratio) (0.445) is also within normal values, averaging (0.959). ADNT has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.029). P/S Ratio (0.197) is also within normal values, averaging (27.378).
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating slightly worse than average price growth. ADNT’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. ADNT’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 87, placing this stock worse than average.
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General Information
a manufacturer of automotive seating systems
Industry AutoPartsOEM