Wed, 23 Aug 2017
We think the Street is misunderstanding the growth potential of this narrow-moat automotive systems manufacturer.
Richard Hilgert: Narrow-moat rated BorgWarner, ticker symbol BWA, currently trades at an attractive 15% to 20% discount compared to our $55 fair value estimate on the company. We think that the Street has misunderstood the growth potential of BorgWarner since its technology have historically been in internal combustion engines and drivelines. We think that the company's economic moats support its growth going into hybrids and battery electrics. It acquired technology through Remy, its acquisition that it did at the end of 2015, that enables this growth. We expect that growth rate to be 2 to 4 percentage points in excess of the global growth in light vehicle demand, which we peg at 1% to 3%.
In summary, we think BorgWarner will benefit from growth in hybrid and battery electric vehicles along with just the general growth in vehicle production throughout the globe. Again, this is 4-star rated stock BorgWarner, narrow-moat rated, attractively valued, trading at a 15% to 20% discount to our $55 fair value estimate.