Putting money to work in the auto industry isn't a smooth ride. These types of companies are generally very capital intensive, register low growth and profits, and face cyclical demand. The auto market is very competitive.
However, an opportunity exists to make money in this part of the economy. Here's one of the best automotive stocks to buy right now.
Ferrari is a luxury brand masquerading as a car company
Ferrari (RACE -3.08%) isn't your average car company. What separates it from the pack is its incredible brand strength, which puts it in the same category as luxury fashion houses, as opposed to its direct peers in the auto industry. The leadership team emphasizes quality over quantity, with the goal of keeping supply well below demand. This supports Ferrari's impressive pricing power.
Between 2014 and 2024, revenue and net income increased 142% and 476%, respectively. Ferrari boasts a stellar 24% trailing-10-year average operating margin.
Shares deserve a premium valuation
Ferrari stock, which has climbed 771% (as of Oct. 8) since its initial public offering in October 2015, doesn't look like a bargain. Investors must be willing to pay for a price-to-earnings ratio of 49.4 to own the business. But given Ferrari's healthy sales and profit gains, coupled with its brand power, it's certainly not a stretch to believe the shares are deserving of a premium valuation.
