With shares of Toyota Motor (NYSE:TM) trading around $120, is TM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Toyota Motor is a Japan-based company mainly engaged in the automobile business and financial business. The company operates through three business segments: Automobile, Finance, and Others. Through its segments, Toyota Motor designs, manufactures, and sells vehicles as well as related parts and accessories; offers financial services related to the sale of its products; and is involved in the design, manufacture, and sale of housing, information, and communication businesses. Vehicles and related products are seeing increased innovation and Toyota Motor is at the head of this trend. Toyota has been dominating the competition and has been first to provide new technologies so look for this to continue.
T = Technicals on the Stock Chart are Strong
Toyota Motor stock has seen a monster bullish run in its stock over the last few months that is launching it towards all-time highs. The stock has now pulled-back a bit after an impressive run so it may need time before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Toyota Motor is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!Taking a look at the implied volatility (red) and implied volatility skew levels of Toyota Motor options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Toyota Motor Options | 33.01% | 96% | 92% |
What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| July Options | Flat | Average |
| August Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Toyota Motor’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Toyota Motor look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 24.31% | 9.73% | 213.19% | 25.31% |
| Revenue Growth (Y-O-Y) | 17.73% | 7.96% | 10.13% | 12.75% |
| Earnings Reaction | 3.12% | 1.04% | 4.36% | 4.97% |
Toyota Motor has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been very pleased with Toyota Motor’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has Toyota Motor stock done relative to its peers, Ford Motor (NYSE:F), General Motors (NYSE:GM), Tesla Motors (NASDAQ:TSLA), and sector?
| Toyota Motor | Ford Motor | General Motors | Tesla Motors | Sector | |
| Year-to-Date Return | 28.87% | 20.15% | 18.83% | 185.4% | 19.61% |
Toyota Motor has been a relative performance leader, year-to-date.
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!Conclusion
Toyota Motor is an innovative company that is pushing the limits of vehicles and related products for the benefit of consumers, companies, and the world. The stock has been on a powerful run over the last year and looks to be headed higher. Over the last four quarters, earnings and revenue figures have increased which have maintained investors in the company very pleased. Relative to its peers and sector, Toyota Motor has been a year-to-date performance leader. Look for Toyota Motor to continue to OUTPERFORM.
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