American Axle Working Through Operational Challenges And A Pessimistic Street

Almost a year ago, I was leery of investing in American Axle (AXL) (or "AAM") ahead of a decline in the auto and light truck sector, even though the valuation was curiously undemanding, and the shares are down a further 20% from that point (with a steeper dive into the end of 2018). Mix and company-specific issues certainly explain some of the relative weakness next to names like Meritor (MTOR) and Dana (DAN), but valuation is curiously weak relative to published sell-side estimates over the next two years.

As was the case a year ago, I'm intrigued by the seemingly low valuation, but it also makes me paranoid as to what I may be missing. I'm not overawed by AAM's mix and its relatively modest leverage to the hybrid/EV migration, but I also believe it will take longer for light trucks to convert to those alternative power sources. I also don't like the high debt level, nor the lack of diversification outside the U.S. (though that doesn't seem so bad right now). This one goes on my watchlist simply because of the curiously low valuation, but I'm still scratching my head as to why that valuation does look so low.

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American Axle Working Through Operational Challenges And A Pessimistic Street