Commercial Vehicle Not Getting Much Love At The Peak Of The Cycle

It’s not exactly news that the market has turned its back on the auto/commercial vehicle parts sector. Allison (ALSN) is a rather glorious exception, with the shares up about 13% over the past year, and Cummins (CMI) has done better than many (down about 13%), but Commercial Vehicle Group’s (CVGI) roughly 30% decline over the past year has been pretty close to the norm for the sector, as investors worry about the near-term impact of higher input costs and the looming cliff in large truck orders and production rates.

Although I do believe that the market is discounting the future cyclicality of CVGI’s revenue and profits too harshly, it’s tough to argue with the tape and the lack of institutional coverage for this name certainly doesn’t help. I do believe the shares are significantly undervalued, but investor sentiment will likely need to improve first for autos and CVGI still needs to prove that it can maintain margin leverage in trucks and execute on long-standing plans to diversify and grow the business.

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Commercial Vehicle Not Getting Much Love At The Peak Of The Cycle