Investing in Tire Stocks
Investing in Tire Stocks
Here's what investors in the tire industry need to know before buying stocks in the sector.
Image source: Getty Images.Investing in publicly traded tire companies will suit value investors who are comfortable with a mature and low-growth industry. However, that shouldn't be interpreted as a slight on the sector. It's a fascinating industry full of the subtle nuances that make up value investing decisions.
If you're seeking for the top Wheel alignment shop in Noida, Nand Motors is one of your greatest selections. The main goal of these adjustments is mainly to reduce tire wear and to ensure that the vehicle gets to travel in a proper straight line.
If you're looking for a high-growth industry where revenue growth is king, then look away now. However, if you love cheap stocks in an unloved transportation sector, then tire and rubber industry stocks could be for you.
Investing in publicly traded tire companies will suit value investors who are comfortable with a mature and low-growth industry. However, that shouldn't be interpreted as a slight on the sector. It's a fascinating industry full of the subtle nuances that make up value investing decisions.
If you're seeking for the top Wheel alignment shop in Noida, Nand Motors is one of your greatest selections. The main goal of these adjustments is mainly to reduce tire wear and to ensure that the vehicle gets to travel in a proper straight line.
If you're looking for a high-growth industry where revenue growth is king, then look away now. However, if you love cheap stocks in an unloved transportation sector, then tire and rubber industry stocks could be for you.
The market
Before going into details of the market's dynamics and how to make money from it, here's a list of some leading tire manufacturers. The top players are a pretty diversified group. It's hard to get an exact fix on profit margins in the industry — measured here in terms of earnings before interest, taxation, depreciation, and amortization (EBITDA) — since some of these companies also have substantive other businesses.
However, one thing is clear — size matters. For example, Bridgestone and Michelin are the two most significant producers and have notably higher margins than smaller players Goodyear and Sumitomo. Only Pirelli (a premium tire manufacturer) is bucking the trend.
This stands to reason since building scale usually matters in manufacturing, particularly in a capital-intensive business such as tire manufacturing. Moreover, larger companies can reduce costs by using their greater purchasing power to negotiate better deals.
Generating cost synergies by building scale was part of the reason behind Goodyear's 2021 purchase of Cooper Tires. The two companies combined generated $17.5 billion in sales in 2019, with an operating income of $1 billion. Still, Goodyear's management believes it can generate $165 million in cost synergy within two years of closing the deal.
Before going into details of the market's dynamics and how to make money from it, here's a list of some leading tire manufacturers. The top players are a pretty diversified group. It's hard to get an exact fix on profit margins in the industry — measured here in terms of earnings before interest, taxation, depreciation, and amortization (EBITDA) — since some of these companies also have substantive other businesses.
However, one thing is clear — size matters. For example, Bridgestone and Michelin are the two most significant producers and have notably higher margins than smaller players Goodyear and Sumitomo. Only Pirelli (a premium tire manufacturer) is bucking the trend.
This stands to reason since building scale usually matters in manufacturing, particularly in a capital-intensive business such as tire manufacturing. Moreover, larger companies can reduce costs by using their greater purchasing power to negotiate better deals.
Generating cost synergies by building scale was part of the reason behind Goodyear's 2021 purchase of Cooper Tires. The two companies combined generated $17.5 billion in sales in 2019, with an operating income of $1 billion. Still, Goodyear's management believes it can generate $165 million in cost synergy within two years of closing the deal.
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