Analysis and Insights
Valuation Metrics
Goodyear Tire & Rubber Co (GT) currently trades at a PE ratio of 37.03, which is significantly higher than the industry average, suggesting potential overvaluation. Its EV/EBITDA of 5.38 also indicates a premium compared to peers. However, the price-to-sales (PS) ratio of 0.54 is relatively low, which could signal undervaluation.
Financial Performance
GT reported 2024 revenue of $18.88 billion, with a net income of $70 million, reflecting a net margin of 0.32%, which is underwhelming. The company's gross margin of 19.61% and ROE of 1.49% further highlight profitability challenges.
Debt and Liquidity
GT's debt-to-equity ratio of 158.62% raises concerns about its financial leverage. While the company has made progress in its turnaround plan, including $200 million in cost cuts ahead of schedule, its high debt load remains a significant risk.
Market Sentiment and Analyst Views
Recent analyst upgrades, including a "Buy" rating from TD Cowen with a $14 price target, suggest optimism about GT's turnaround potential. However, the stock's 17% decline since the transformation plan's announcement indicates investor skepticism.
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Technical Analysis
GT's stock price has been volatile, closing at $9.38 on March 11 with a 3% daily drop. The RSI of 51.6 indicates a neutral position, while the MACD signal line is flat, suggesting weak momentum.
Fibonacci Levels
The stock is trading near its Fibonacci pivot level of $9.15, with resistance at $9.79 and support at $8.51.
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Conclusion
GT appears overvalued based on its high PE and EV/EBITDA ratios, low net margin, and significant debt. However, its turnaround plan and analyst upgrades provide upside potential. Investors should monitor progress on debt reduction and profitability improvements.
