The Aston Martin Lagonda (LSE: AML) share price is down a crushing 98% since the company floated in October 2018. That includes a fall on Wednesday (26 February) in response to 2024 results.
Scary statistic
Want to hear what might be the most shocking statistic so far? My Motley Fool colleague James Beard worked out that since flotation, Aston Martin has lost an average of £45,289 for every vehicle sold. He points out that it would have cost less to give every buyer £40,000 to buy a car somewhere else.
Prior to its current incarnation, previous versions of Aston Martin had gone bust seven times. At this rate, the fear is the eighth might not be too far ahead. It all hinges on whether this rate of loss can be stemmed. And that does appear to be the company’s focus right now.
This time, the company said it “expects to make significant improvements across all key financial performance metrics in 2025, compared to the prior year“. It’s said similar things before. But if this really is the time it pulls it off, we could see “positive adjusted EBIT in FY 2025 and free cash flow in H2 2025“.
By around 2027 to 2028, the board puts its approximate guidance at revenue of £2.5bn, with adjusted EBIT of £400m and a net leverage ratio below 1 times.
Possible outcomes
At 30 December 2024, the balance sheet showed cash of £360m, with available facilities taking liquidity up to £514m. That sounds like enough to keep things going until the time the board thinks it can turn things round.
But the cash was boosted by approximately £235m in private debt placings in August and November last year. And those helped push year-end net debt as high as £1.16bn. That’s more than 40% higher than last year’s £814m.
So, that’s one possible outcome. Aston Martin might manage to hit those targets and achieve positive cash flow by the end of 2025. If that happens, I could see a lot of investors heaving sighs of relief and pushing their buy buttons.
With the share price so low, there seems to be one other clear possibility. Maybe we might see a buyout attempt this year. Especially if it looks like wheels are turning in the right direction as we get close to trading updates. I imagine a few global auto makers could like the idea of adding the Aston Martin marque to their stable. There’s value in a name.
Worst outcome?
If neither of these things happen, the positive noises are delayed another year, and fresh debt or equity funding isn’t available? It really might be bust number eight.
But then, I reckon a bold investor who takes a risk might do well if we really do see some profit. And I don’t think it would need a lot of profit to trigger a sentiment turnaround.
It’s too much risk to fit my strategy. But I might pop round and ask for £40,000 and threaten to buy a car if I don’t get it.
