Valeo Underrated By The Street As It Continues To Outperform Build Rates

With global light passenger vehicle unit sales down more than 24% year over year in the first quarter of this year, you can probably imagine how the shares of most auto parts suppliers are looking these days. Valeo (OTCPK:VLEEY) (FR.PA) certainly isn't unusual in that regard, with the shares down almost by half over the past year and down about 40% since the start of the year.

I continue to believe Valeo is a long-term winner in the evolution toward hybrid and electric cars, but the company is most definitely not out of the woods yet. It's going to take a couple of years to reach/surpass 2019 levels of revenue and profits, and there are ongoing cash burn risks with the company's JV with Siemens (OTCPK:SIEGY), not to mention valid concerns that the COVID-19 recession will push back the adoption curve of hybrids and electrics. On the other hand, this is a company that has been solidly outperforming underlying builds and has a strong hybrid/EV offering. This is a high-risk selection, but one that I think is worth serious consideration.

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Valeo Underrated By The Street As It Continues To Outperform Build Rates