{"id":75421,"date":"2023-10-22T01:22:38","date_gmt":"2023-10-22T05:22:38","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/ab-volvo-strong-net-sales-growth-and-cogs-ratio-otcmktsvlvly\/"},"modified":"2023-10-22T01:22:46","modified_gmt":"2023-10-22T05:22:46","slug":"ab-volvo-strong-net-sales-growth-and-cogs-ratio-otcmktsvlvly","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=75421","title":{"rendered":"AB Volvo: Strong Net Sales Growth And COGS Ratio (OTCMKTS:VLVLY)"},"content":{"rendered":"
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Investment Thesis: I take the view that Volvo Group has the capacity to see further upside from here, based on a favourable P\/E ratio and strong performance in terms of higher net sales and a lower COGS ratio.<\/p>\n

In a previous article back in July, I made the argument that AB Volvo (OTCPK:VLVLY) could continue to see upside from here, on the basis of a decrease in the cost of goods sold ratio as well as continued growth in deliveries across the Trucks segment.<\/p>\n

Since then, the stock has descended to a price of $19.94 at the time of writing:<\/p>\n

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\"TradingView.com\"<\/span> <\/picture>
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<\/span>TradingView<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The purpose of this article is to assess whether Volvo Group has the ability to see continued growth from here taking recent performance into consideration.<\/p>\n

Performance<\/h2>\n

When looking at the most recent earnings results for Volvo Group, we can see that total net sales were up by 19% for the first nine months of 2023 as compared to that of the previous year. The vehicles group accounts for the majority of net sales and saw a 20% increase over this period.<\/span><\/p>\n

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\"Volvo<\/span> <\/picture>
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Volvo Group: Report on the third quarter 2023<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

In addition, it is also encouraging that Europe – the largest geographical region by net sales – saw a 24% increase over the first nine months of this year as compared to last, with that of North America also up by 24%.<\/p>\n

I had previously remarked that one metric Volvo Group had been performing notably well in has been the cost of goods sold ratio (calculated as cost of sales\/net sales<\/strong> per quarter). Particularly, we can see that cost of goods sold for Q3 has continued to remain lower than that seen in the previous year – and has been so for all three quarters in 2023.<\/p>\n

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\"Cost <\/picture>
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Cost of goods sold ratio calculated by author using quarterly sales and cost of sales figures sourced from historical Volvo quarterly reports. Heatmap generated by author using Python’s seaborn library.<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The reason I chose to pay attention to this metric was that I had cited upward pressure on production costs as a potential risk for Volvo Group – which had the potential to hinder profitability in spite of a rebound in truck demand.<\/p>\n

However, this risk does not appear to have materialised to date – and the cost to goods sold ratio remains lower in 2023 as compared to that of last year – and at the lowest levels seen in the past five years.<\/p>\n

With regards to short-term liquidity, we can see that the quick ratio of Volvo Group (calculated as total current assets less inventories all over total equity and liabilities less total equity) has remained steady and has seen a slight increase from that of the last quarter. Figures provided pertain to that of the Industrial Operations segment.<\/p>\n

<\/span><\/p>\n\n<\/colgroup>\n<\/colgroup>\n\n\n\n\n\n\n
<\/td>\nDec 2022<\/strong><\/td>\nMar 2023<\/strong><\/td>\nJun 2023<\/strong><\/td>\nSep 2023<\/strong><\/td>\n<\/tr>\n
Total current assets<\/td>\n235840<\/td>\n244626<\/td>\n243555<\/td>\n240872<\/td>\n<\/tr>\n
Inventories<\/td>\n75382<\/td>\n84503<\/td>\n92939<\/td>\n92695<\/td>\n<\/tr>\n
Total equity and liabilities<\/td>\n431771<\/td>\n443505<\/td>\n449814<\/td>\n441624<\/td>\n<\/tr>\n
Total equity<\/td>\n147439<\/td>\n158951<\/td>\n144134<\/td>\n155837<\/td>\n<\/tr>\n
Quick ratio<\/strong><\/td>\n0.56<\/strong><\/td>\n0.56<\/strong><\/td>\n0.49<\/strong><\/td>\n0.52<\/strong><\/td>\n<\/tr>\n<\/table>\n

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