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He Aston Martin Lagonda (LSE:AML) share price continues to rise. It spiked after the release of encouraging financial data for the full year in mid-week trading. And it posted more gains on Thursday: The luxury automaker is currently 6% higher on the day.
At 220 pence per share, Aston Martin shares are trading at eight-month highs. But can James Bond’s favorite carmaker continue his recent comeback? And should I buy the business for my investment portfolio today?
financially stronger
In summary, on Wednesday, the company announced a 26% improvement in revenue in 2022. At £1.38bn, sales were boosted by a strong end to the year as fourth quarter turnover rose 46%. .
On the downside, pre-tax losses rose to £495m last year from £213.8m in 2021. This was caused by higher than normal cost inflation and heavy investment in brands, marketing and product launches.
But overall, this latest update has given Aston Martin’s beleaguered investors more to cheer for than poke holes. The company ended 2022 with a cash balance of £583.3 million, more than £164 million year-over-year thanks to capital raised from the sovereign of Saudi Arabia. background last fall.
Concerns about Aston’s financial situation have long dogged the company. So the news that net debt fell too, to £765.5m from £891.6m, provided more reason to celebrate.
sound strategy
No one has ever doubted the exceptional brand power of Aston Martin vehicles. It’s what’s been going on under the hood of the premium engine maker that has investors worried.
Wednesday’s update, then, has raised hopes that business is finally picking up. Encouragingly, there are signs that management’s decision to double down on investment at the ‘ultra-luxury’ end of the market is also paying off.
The firm says 80% of its GT/Sports range is sold out by 2023. It sold 6,412 vehicles last year and expects wholesale volumes to improve to around 7,000 this year.
Spending among high net worth consumers is largely unaffected by economic downturns. In fact, your appetite remains strong during these periods, even when the prices of your favorite items increase. Aston Martin’s improvement in gross margins last year (which rose 2 percentage points to 33% thanks to better pricing) is proof of this.
This is what I’m doing now
I love a good recovery play. And I’ll keep an eye out for Aston Martin. But at the moment I’m not happy to invest in the automaker yet.
Analyst Sophie Lund-Yates of Hargreaves Lansdown You have summed up my opinion of the automaker in a few words. She comments that “Aston Martin has a revered product offering, but there are plenty of financial sockets that need filling. Until that happens, further capital increases cannot be completely ruled out, despite the £654m share capital increase made last year..”
There have been a number of false dawns in the business in recent years. However, the share placements have been a constant headache for its shareholders in that time. Significant cash burn remains a threat and the business still has a lot of debt on its books.
Supply chain issues and high inflation remain a problem. And the company has to compete hard in a crowded market to reach its sales targets. Overall, I think Aston Martin shares still carry too much investment risk.
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