Monthly Archives: May 2014

KEYW: Zacks’ Bear of the Day Play

After reporting declining revenues and a loss of 8 cents per share in the first quarter, analysts revised their estimates significantly lower for The KEYW Holding Corporation (KEYWSnapshot Report). This sent the stock to a Zacks Rank #5 (Strong Sell) stock.

Although shares of KEYW have taken a beating the last several weeks, it still doesn’t look like a value on a price to earnings or price to cash flow basis. Investors should consider avoiding this stock until its earnings momentum improves.

KEYW provides cybersecurity, cyber superiority and geospatial intelligence solutions to US Government defense, intelligence and national security agencies and commercial enterprises to meet the needs for agile intelligence and assist the US government in national security priorities. KEYW provides solutions, services and products to support the collection, processing, analysis, and use of intelligence data and information in the domains of cyberspace and geospace.

KEYW’s CEO is former NSA official Leonard Moodispaw.

First Quarter Results

KEYW reported its first quarter results on May 1. The company reported a loss of 8 cents per share, which was less than the Zacks Consensus Estimate calling for a loss of 7 cents. The company reported a loss of 6 cents per share in the same quarter last year.

Revenue plunged 18% year-over-year to $63.8 million due in part to “lingering effects of sequestration and weather disruptions in the greater DC area”. The company estimates the revenue impact from severe weather to be approximately $4 million in the quarter.

KEYW’s primary segment, ‘Government Solutions’, experienced a 19% drop in revenue to $61.3 million. Meanwhile, its ‘Commercial Cyber Solutions’ saw top-line growth of 24% to $2.5 million.

Despite the overall revenue decline, KEYW’s gross profit margin actually improved from 30.9% to 33.7% of total revenue. However, operating expenses jumped 10% year-over-year to more than offset this. This was driven by increased infrastructure costs within its ‘Commercial Cyber Solutions’ division, partially offset by cost reductions in ‘Government Solutions’.

Estimates Falling

Analysts revised their estimates significantly lower for both 2014 and 2015 following the Q1 miss. This sent the stock to a Zacks Rank #5 (Strong Sell).

The 2014 Zacks Consensus Estimate is now $0.01, down from $0.21 just 90 days ago. The 2015 consensus is currently $0.58, down from $0.79 over the same period.

You can see the drop in both 2014 and 2015 estimates in the company’s ‘Price & Consensus’ chart:

Premium Valuation

Shares of KEYW are down more than 50% since March 20. That is the same day the company announced that former CFO John Krobath would be stepping down.

Despite the significant haircut, shares of KEYW still don’t look like a screaming value at more than 18x next year’s consensus of $0.58 and 30x trailing 12-month operating cash flow.

KEYW also has a negative tangible book value.

The Bottom Line

With falling estimates and premium valuation, investors should consider avoiding KEYW at least until its earnings momentum improves.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

MidSouth Bancorp: Zacks’ Bull of the Day Play

MidSouth Bancorp (MSLSnapshot Report) recently delivered strong first quarter results, with business improving in almost every area. This prompted analysts to revise their estimates significantly higher for both 2014 and 2015, sending the stock to a Zacks Rank #1 (Strong Buy).

While shares of MidSouth have risen sharply since the Q1 report, valuation still looks very reasonable, providing shareholders with plenty of further upside potential.

MidSouth Bancorp is the holding company for MidSouth Bank, which has 61 locations in Louisiana and Texas, including a Loan Production Office in Austin, Texas. It is headquartered in Lafayette, Louisiana and has a market cap of $213 million. The company had assets of $1.9 billion as of March 31, 2014.

First Quarter Results

MidSouth delivered better-than-expected first quarter results on April 29. Adjusted earnings per share came in at 33 cents, beating the Zacks Consensus Estimate of 27 cents. It was a 22% increase over the same quarter last year.

Net interest income rose 3% year-over-year. This was driven by strong loan growth as total loans and leases rose 10%. Commercial, financial and agricultural loans, which represent approximately 37% of the total loan portfolio, led the way with a stellar 38% increase year-over-year. The core net interest margin for the period improved 30 basis points from the same quarter last year to 4.33%.

Adjusted non-interest income rose 11% year-over-year, driven by increases in service charges and ATM and debit card income. Meanwhile, non-interest expense increased just 2% over the same period as the company’s efficiency initiative has begun to show results.

Credit quality improved too. Nonperforming assets to total loans, other real estate owned and other repossessed assets improved from 1.46% to 1.08%.

Estimates Rising

The strong across-the-board Q1 results prompted analysts to unanimously revise their estimates higher for both 2014 and 2015. This sent the stock to a Zacks Rank #1 (Strong Buy).

You can see the sharp increase in consensus estimates in the company’s “Price & Consensus” chart:

The Zacks Consensus Estimate for 2014 is now $1.37, up from $1.21 before the Q1 report. The 2015 consensus is currently $1.50, up from $1.40 over the same period.

Reasonable Valuation

Shares of MidSouth have risen about 15% since the company’s Q1 report. But the valuation picture still looks very reasonable with shares trading at 13x 12-month earnings. That’s a discount to its 10-year median of 15x.

Its price to book value ratio is a reasonable 1.3, which is also a discount to its historical median of 1.4x.

In addition, the company also pays a dividend that yields a solid 1.9%. It recently increased its payout by 13%.

The Bottom Line

With improving business trends, rising earnings estimates and reasonable valuation, MidSouth Bancorp still offers investors attractive upside potential.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

JPMorgan Chase: Zacks’ Bear of the Day Play

While speaking at a London conference on capitalism, IMF managing director Christine Lagarde said progress on building a safer financial system had been slowed by industry attempts to halt the introduction of tougher rules on banks. The comments were backed up by the Bank of England’s Mark Carney saying “unbridled faith in financial markets” before the recent crisis, rising inequality and corruption had damaged the “social fabric.” No doubt they are referring to scandals such as LIBOR manipulation, insider trading, and that wonky catch phrase from the Great Recession, “Too big to fail.”

Apparently “Too big to fail” also means “Too big to grow” as increased regulation has led to decreased profits for many banks around the country. Or at least that’s what the banks will tell you as their shelling out multi-billion dollar settlements for their bad behavior. Which leads us to today’s Bear of the Day, JPMorgan Chase (JPMAnalyst Report).

Now before you go storming into your local Chase branch and start yelling at some twenty-something trying to make ends meet you have to recognize that most of this madness isn’t at the surface. The banking scandals that have rocked the industry came from the top, not the kid helping you fill out your mortgage application. But let’s try to keep emotions from clouding our judgment and take a look at the numbers:

$13 billion settlement over its sale before the financial crisis of mortgage-backed securities

$110 million settlement for manipulation of Japanese yen version of LIBOR in 2007

$2.6 billion to victims of Madoff’s fraud

$4.5 billion to 21 institutional investors to settle MBS claims

$100 million to the CFTC to settle charges regarding the “London Whale”

$920 million to the OCC, the SEC, the Fed, and the UK Financial Conduct Authority

$389 million to credit-card customers

There are three or four other eye-popping settlements you could throw in here. These are part of the reason why fourteen analysts have revised their earnings estimates to the downside in the last 60 days for JPM, dropping consensus for the current year from $5.98 per share down to $5.45 and next year’s numbers down from $6.37 to $6.09.

I don’t want to be too harsh on JPM. After all, they are the bank that propped up Bear Stearns. JP Morgan himself loaned the US Government money during the Great Depression. Jamie Dimon is a certifiable genius and as a retail client myself I’m very happy with my banking experience. But I’m not here saving the manatees, I’m here saving your investment dollars.

The chart looked a whole lot better before April hit. The stock was trading above $60, the 25 day moving average shifted by 5 days was below the price and positively sloped. Since then we saw a harsh downturn in the stock, ultimately finding support down at $53. This helped pushed the stochastics into an extreme oversold condition.

There was a small bounce off $53 but this may be just a small reprieve and not the start of a corrective trend back to the upside. This mid-$50 range where the stock sits today is a heavy volume zone and was an area of support during the slide. As is often the case, former support becomes future resistance. With the stock budding up against this resistance I’d be careful about jumping headfirst into a trade like this.

 

 

The major regional bank industry ranks in the bottom 13.96% of our Zacks Industry Rank. There is not a single stock in the industry right now that carries a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy).

 

Cooper Tire: Zacks’ Bull of the Day Play

This market is as hot as the weather. With a hot market comes crazy valuations and wild stock movements. Rather than jump after a stock that’s already made its big moves a market like this calls for a little more research. A little more digging to find that diamond in the rough that may outpace the broad index in the short run. Today I found a turnaround story where the rubber meets the road for the Bull of the Day, Cooper Tire (CTBAnalyst Report).

With Memorial Day just a few short days ago, I thought keeping an American theme was appropriate. Cooper Tire was founded in 1914 and is headquartered in Findlay, Ohio. They specialize in the design, manufacture, marketing and sales of replacement automobile and truck tires. As American as apple pie, Cooper Tire manufactured pontoons, landing boats, waterproof bags and camouflage for the troops during World War II. Cooper owns a variety of subsidiaries including the famous racing brand Mickey Thompson and part of the South Korean brand Kuhmo.

After a few quarters of disappointing earnings reports Cooper has found traction recently and is regaining ground it lost. An ugly year of misses and downward revisions saw the stock slapped down from the mid-$30s to low $20s during 2013. A quick look at the price and consensus chart outlines the damage of the earnings gaffes.

 

 

So what happened over at Cooper that caused all this? Cooper nearly merged with Apollo Tyres out of India. News of merger caused a worker strike out of protest in a Chinese joint venture manufacturing facility. The strike had a disastrous impact on earnings for the company. That’s what needed to work itself out in time. The merger with Apollo was ultimately terminated. Now you’re left with a company that has the same growth prospects as it had pre-merger but it’s trading 20% off.

After missing earnings by 34 cents and 26 cents back-to-back quarters Cooper bounced back by beating by 10 cents for Q4 2013 and by 22 cents Q1 2014. These beats helped bring back optimism surrounding the company. So much so that three analysts have raised their current year estimates, hiking consensus from $2.18 to $2.63 per share. Next year’s numbers jumped from $2.38 to $2.64.

The turnaround for CTB is not just evident in the earnings estimate picture but also in the stock’s technicals as well. After reaching a low of $20.55 in December of last year CTB has slowly carved out a bottom and broke higher. You can see the shift in attitude as the 25 day moving average shifted by 5 days changed from being a topside area of resistance with a negative slope to a bottom end support level with a positive slope.  

Early May shortly after the earnings beat of 22 cents CTB gapped higher, going from under $26 to over $28 in a single day. Since then the gap has not been filled but has been tested. Mid-May CTB came down to $26.62 before finding support. Right now it appears that CTB is in an area of consolidation after the rebound from the lows. As this range decreases, the likelihood of a breakout to the upside increases. You can give this a firm top at $29 and a bottom end of $26.50. Traders looking to make a move on CTB should either play the breakout or wait for the low $27s and put on a long trade with a tight stop-loss just outside of the range.

PROS Holdings: Zacks’ Bear of the Day Play

PROS Holdings (PROSnapshot Report) recently missed the Zacks Consensus Estimates for Q1 on both the top and bottom lines. Although management reiterated its full year revenue guidance, analysts revised their earnings estimates lower for both 2014 and 2015. This sent the stock to a Zacks Rank #5 (Strong Sell).

While shares of PROS Holdings have taken a beating like many other “high tech” stocks, valuation still looks very expensive with shares trading at 144x next year’s earnings.

PROS Holdings is a “big data” software company that offers solutions to optimize sales, pricing, quoting, rebates and revenue management across more than 40 industries. Around 69% of total revenue comes from “License & Implementation” while the rest comes from “Maintenance & Support”. Approximately 56% of its revenue comes from outside of the United States.

First Quarter Results

PROS Holdings reported its first quarter results on May 8. Adjusted earnings per share (which still includes share-based compensation) came in at a loss of 12 cents, which was below the Zacks Consensus Estimate calling for a loss of 9 cents.

Total GAAP-revenue rose 25% year-over-year to $40.9 million, but it was below the consensus of $42.0 million. The increase was driven by 25% growth in “License & Implementation” while “Maintenance & Support” increased 14%. The impressive revenue growth did not translate into impressive profit growth, however.

One reason for this was a decline in the gross profit margin, which fell from 69% to 66% of total revenue. Moreover, there was a 57% jump in ‘Selling, marketing, general and administrative expenses’. These expenses accounted for 55% of total revenue, up from 42% in the same quarter last year.

R&D costs totaled 28.3% of revenue, up from 24.1% in the same quarter last year. The company also recognized $4.4 million in share-based compensation in the quarter.

One bright spot was cash from operations, which improved from $1.3 million to $3.4 million in the quarter.

Estimates Falling

In the Q1 report, management reiterated its full year revenue guidance. But that didn’t stop analysts from lowering their earnings estimates for both 2014 and 2015.

This sent the stock to a Zacks Rank #5 (Strong Sell).

As you can see below, consensus estimates – and the stock price – have fallen considerably so far in 2014.

The current 2014 Zacks Consensus Estimate is -$0.04, down from +$0.14 just 90 days ago. The 2015 consensus is now $0.16, down from $0.27 over the same period.

Pricey Valuation

PROS Holdings, like a lot of other “high tech” stocks, has sold off heavily lately. But the valuation picture still does not look attractive. The stock trades around 576x 12-month forward earnings and 144x 2015 earnings. And its EV/EBITDA multiple is a lofty 80x.

This is despite the fact that shares of PRO are down more than 40% from their 52-week high.

The Bottom Line

With very little profit, falling earnings estimates, and premium valuation multiples, investors should avoid PROS Holdings at least until its earnings momentum improves.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

Westlake Chemical: Zacks’ Bull of the Day Play

Earnings estimates have risen strongly for Westlake Chemical Corporation (WLKSnapshot Report) following the company’s 9th consecutive positive earnings surprise on May 5. It is a Zacks Rank #1 (Strong Buy) stock.

While shares of Westlake jumped after the latest beat, the valuation picture still looks reasonable, which leaves plenty of room for further upside.

Westlake Chemical Corporation manufactures and markets basic chemicals, vinyls, polymers and fabricated building products. Its operates in two segments:

  • Olefins (~69% of total sales), which are the basic building blocks used to create a wide variety of petrochemical products, and
  • Vinyls (~31% of total sales), which include PVC, VCM, EDC, chlorine, caustic soda and ethylene. The company also manufactures and sells building products fabricated from PVC, including pipe, fittings, profiles and foundation building products, fence and deck, and window and door components.

First Quarter Results

Westlake Chemical reported better-than-expected first quarter results on May 5. Earnings per share came in at $1.18, beating the Zacks Consensus Estimate of $1.13. It was a 28% increase over the same quarter last year.

Net sales rose 19% to $1.028 billion, well ahead of the consensus of $964.0 million. This was due in part to an acquisition, but the company also saw higher sales volumes for polyethylene and ethylene, as well as higher sales prices for most of its major products. The company’s “Olefins” segment saw top-line growth of 24% as average selling prices rose an impressive 13.3% while volumes grew by 10.7%. The “Vinyls” segment increased 8% as a 32% jump in building products was offset by a 2% decline in ‘PVC, caustic soda and other’.

Meanwhile, operating profit soared 28% as record quarterly profits in “Olefins” more than offset a loss in “Vinyls”.

Estimates Rising

Following strong Q1 results, analysts revised their estimates significantly higher for both 2014 and 2015. This sent the stock to a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for 2014 is now $5.35, up from $5.13 before the Q1 report. This represents 18% annual EPS growth. The 2015 consensus is currently $5.58, up from $5.33 over the same period. This corresponds with 4% EPS growth.

Rising earnings estimates have been a recurring theme for Westlake lately. The company has delivered 9 consecutive positive earnings surprises and has seen consensus estimates move consistently higher over that stretch.

Reasonable Valuation

Shares of Westlake Chemical are up more than 8% since the Q1 report, but the valuation picture still looks reasonable. Shares trade around 14x 12-month forward earnings and 13x trailing 12-month operating cash flow.

The Bottom Line

With rising prices and volumes, very strong earnings momentum, solid growth projections and reasonable valuation, Westlake Chemical still offers investors attractive upside potential.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

PennyMac Mortgage: Zacks’ Bear of the Day Play

PennyMac Mortgage Investment Trust ((PMTSnapshot Report) is a REIT that invests primarily in residential mortgage loans and mortgage-related assets. The company operates as a REIT for tax purposes. PMT is an externally managed by PNMAC Capital Management, LLC (PCM) an investment adviser.

PennyMac invests in residential mortgage-related opportunities including mortgage loans, mortgage servicing rights and mortgage-backed securities. PMT invests in both newly originated prime mortgage loans and distressed mortgage loans.

Disappointing First Quarter Results

PMT reported its Q1 results on May 7, 2014. Net income for the quarter was $37.9 million, down 28% from the prior quarter, mainly due to lower income from correspondent lending as well as reduced gains in the distressed loan portfolio.

Net investment income was $76.6 million, down 20% from the prior quarter. At $0.50 per share, net income was 27% short of the Zacks Consensus Estimate of $0.68 per share.

ROE declined to 10% from 14% in the prior quarter but the book value increased to $20.88 from $20.82 in the prior quarter.

Results were affected by the contraction in the mortgage origination market. The management said that the market for distressed whole loans was changing and in general the pricing was unattractive.

Downwards Revisions

Due to disappointing results, quarterly and annual estimates have been revised sharply downwards in the past few weeks by analysts.

Zacks Consensus Estimates for the current and next fiscal year now stand at $2.46 per share and $2.57 per share, from $2.81 per share and $2.93 per share, 30 days ago.

Declining estimates sent PMT back to Zacks Rank # 5 (Strong Sell) earlier this month.

The Zacks Price and Consensus chart shows the trend of declining estimates for the company:


The Bottom Line

Adverse pricing conditions in the distressed loans market and a highly competitive origination environment will continue to pose headwinds for the stock.

Further, a brightening economy and rising rate environment does not bode well for the profitability of the company.

Better Play in the Industry?

Real Estate operations industry is currently ranked 163 out of 265 Zacks industries (Bottom 38%). There is no stock currently ranked #1 (Strong Buy) by Zacks in this industry.

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E Trade Financial: Zacks’ Bull of the Day Play

Headquartered in New York, E*TRADE Financial Corporation (ETFCAnalyst Report) provides online brokerage and related products and services individual investors and stock plan participants.

The Company provides these services to customers both online and through their network of customer service representatives and financial consultants. The company also operates a bank for deposits generated through its brokerage business.

ETFC was incorporated in 1982 and had its IPO in 1996.

Excellent First Quarter Earnings

On April 23, E*TRADE reported its Q1 results. Net income for the quarter was $97 million– highest in about seven years, and up from $35 million in Q1 of 2013. At $0.33 per share, it was also substantially better than the Zacks Consensus Estimate of $0.23 per share. ETFC has beat/met Zacks estimates in all of last four quarters, with an average quarterly surprise of 52.5%.

According to the management, “overall positive investor sentiment elevated brokerage activity to its highest level in nearly five years, which aided our record net new brokerage assets and brokerage account retention”.

Daily average revenue trades (DARTs) for the quarter were 198,000—up 24% from the prior quarter and 33% from the prior-year quarter.

ETFC got 72,000 net new brokerage accounts during the quarter, taking the total to 3.1 million accounts. During the quarter, customers added a record $4.1 billion in net new brokerage assets–an annualized growth rate of 7.5%.

As of March 31, 2014, bank and consolidated Tier 1 leverage ratios were 9.7% and 7.0% respectively, up from  9.5% and 6.7% at the end of the previous quarter.

Positive Earnings Estimates Revisions  

After excellent results, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and next year are now $1.06 and $1.23 per share up from $0.95 and $1.20 per share respectively, 30 days ago.

The following chart shows the positive earnings momentum for the stock:


Rising estimates sent ETFC back to Zacks Rank #1 (Strong Buy) after the results.

Solid Industry Rank

Zacks industry rank for “Investment Brokers” is currently 37 out of 265 (top 14%).

The Bottom Line

ETFC is a Zacks Rank#1 (Strong Buy) stock. Further top Zacks Industry Rank also indicates strong chances of outperformance in the short- to medium- term.

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SurModics: Zacks’ Bear of the Day Play

SurModics (SRDXAnalyst Report) is a leading provider of surface modification technologies in the areas of biocompatibility, site specific drug delivery, biological cell encapsulation, and medical diagnostics.

SurModics partners with the world’s foremost medical device, pharmaceutical and life science companies to bring innovation together for better patient outcomes. Recent collaborative efforts include the implementation of SurModics’ Bravo drug delivery polymer matrix as a key component of the first-to-market drug-eluting coronary stent.

SurModics is also active in the ophthalmology market with a sustained drug delivery system that is currently in human trials for treatment of retinal disease. A significant portion of SurModics’ revenue is generated by royalties earned from the sale of customers’ commercial products.

Back to a Zacks #5 Rank Strong Sell

I last wrote about SurModics as the Bear of the Day in early December after the company reported its fourth quarter fiscal year 2013 results and the results were mixed, with weaker forward guidance the main catalyst for analysts to cut estimates and push the stock to a #5. For fiscal 2013, SurModics reported earnings of 85 cents per share, 29% higher than last year, but short of the Zacks Consensus Estimate by 2 cents.

SRDX shares were trading around $23 in December and climbed into the new year, making a double-top at $26 in January and March before steadily dropping again to an apparent support level around $20 this month from the June-September lows of last year.

The earnings reports for the December and March quarters, delivered in late Jan and early May respectively, offered EPS beats, but the sales guidance was enough to keep investors cautious. On May 1, the company reported EPS of $0.22, 2-cents better than the Zacks consensus estimate.

But revenues fell 0.7% year/year to $13.6 mln vs the $14.41 mln consensus. And the company offered mixed guidance for FY14, seeing EPS of $0.85-0.97 vs. the consensus of $0.92. They also projected revenues for FY14 of $56.0-58.5 mln vs. the $59.30 mln consensus.

In December, SurModics had given guidance for FY14 revenues in the range of $58-$62 million. And this is why the stock became a #5 Rank again as analysts dropped their estimates yet again. The declining sales picture could be a function of lost royalty payments related to Johnson & Johnson stent licensing agreements.

But whatever the causes, be sure to rely on the Zacks Rank for SurModics to let you know when the coast is clear and analysts are positive again on the company’s earnings growth potential.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.

Tata Motors: Zacks’ Bull of the Day Play

While Tesla Motors (TSLAAnalyst Report) has stolen the spotlight this year for growth and stock volatility, investors in another unique car company have been quietly and steadily rewarded.

Tata Motors (TTMSnapshot Report) shares are up roughly the same 35% year-to-date as TSLA (as of Wednesday 5/21), but with far less volatility. A 41% earnings surprise for their December quarter (3QFY13) helped the outlook as sales in the British Jaguar Land Rover unit grew 23%, with demand for their luxury vehicles increasing in China, North America and Europe.

This made the stock a stock a Zacks #1 Rank in February after the report and my colleague Neena Mishra chose Tata for her Bull of the Day on March 6, where she remarked on the company’s key acquisition six years ago…

“Tata Motors had acquired both the Jaguar and Land Rover brands from Ford Motors in 2008 and turned them around into a major profit source. Management expects the sales and performance momentum for Jaguar Land Rover to continue with a richer product and geography mix.”

Back to #1

This week, Tata earns back the top Zacks Rank as analysts hike estimates following record April sales for Land Rover at +28% year-over-year. This prompted Jefferies & Company to boost 2014 EPS estimates from $3.86 to $4.31 and next year profit targets from $3.98 to $4.42.

This pushed up the 2015 EPS consensus of India’s top car and truck maker to $4.52 and brought down the forward P/E multiple under 9X, in line with competitor Toyota (TMAnalyst Report). Tata ranks as the world’s fifth largest truck manufacturer and fourth largest bus manufacturer with operations in the UK, South Korea, Thailand, South Africa and Indonesia.

Though less than 1/6 Toyota’s size, the $26 billion Tata compares very well on a price-to-sales basis too as they get only a slight premium of 0.72 vs 0.67 for 4 times the projected growth rate of the $171 billion Japanese behemoth.

India’s Top Brand

In a 2013 study, The Economic Times of India found Tata to be the country’s most revered brand, noting “In a free enterprise, the community is not just another stakeholder in business, but is, in fact, the very purpose of its existence’; that, in a nutshell, is the fundamental philosophy espoused by founder Jamsetji Tata.”

The Tata industrial group of companies operates in sectors that encompass steel and energy as well as autos. Tata Motors traces its roots back to 1945 when the Tata Engineering and Locomotive Co. was established to manufacture locomotives and other engineering products.

Several interesting milestones in the company’s history mark the path of a key automotive partner and growing empire in the world’s second most populous country…

1954: Collaboration with Daimler Benz for manufacture of medium commercial vehicles

1983: Manufacture of Heavy Commercial Vehicle commences

1985: First hydraulic excavator produced in collaboration with Hitachi

1991: Launch of first indigenous passenger vehicle, the Tata Sierra, and 1 millionth commercial vehicle sold

1993: JV with Cummins (CMIAnalyst Report) for manufacture of high horsepower and emission friendly diesel engines

1994: JV with Daimler-Benz for manufacture of Mercedes Benz passenger cars in India

2005: Launch of Tata TL 4X4, India’s first Sports Utility Truck, and 1 millionth passenger car sold

2006: 3 millionth commercial vehicle sold

2008: Tata Motors unveils its People’s Car, Tata Nano, at the 9th Auto Expo

2009: Launch of the Jaguar Land Rover range of premium luxury vehicles — Jaguar XF, XFR & XKR and Land Rover Discovery 3, Range Rover Sport and Range Rover in India

2010: Tata Nano receives the world’s oldest and most coveted GOOD DESIGN™ Award for 2010, 4 millionth commercial vehicle sold

2013: Tata Nano offered industry first phenomenon – Swipe your credit card and drive home a Nano

A Modi-fied Economy

In Neena’s March report on Tata, she noted that the Jaguar Land Rover brands are carrying the day right now for the company in terms of growth…

“Sales of Tata-branded vehicles fell 36% in India due to weakening demand, increasing competition, and a tight financing environment. Management hopes that recent launches including Nano Twist and Vista VXTech and upcoming products like BOLT and ZEST will be able to drive sales in India and some of the international markets where they are expanding.”

Clearly, the Jaguar Land Rover unit is a key growth asset for Tata. But other good news could be brewing for India’s automotive powerhouse following the national election of the pro-growth Narendra Modi and his Bharatiya Janata Party (BJP).

According to our in-house all-things-political-in-India expert Neena…

“With a landslide win, BJP led by Modi is all set to form the government on its own in India, without having to rely on smaller, regional parties’ support. No single political party had won an absolutely majority in India since 1984 and coalition politics has been one of the main reasons for the policy paralysis seen in recent year as regional parties had their own narrow interests and agendas and often blocked reform measures. With a decisive mandate, it would be easy for the Modi government to effectively execute their reforms agenda which should accelerate economic growth in India.”

And this is indeed what many US investment analysts recognize as they continue to raise their targets for India’s stock market index, the Sensex. While Tata shares have had quite a run already this year, I bet this stock will still be under accumulation by large investors any time it dips to its 50-day moving average.

Tata Motors reports for the March quarter on Thursday May 29.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.