Toyota Motor Corp. (TM, Financial) has experienced unparalleled success in the first year under CEO Koji Sato, marking the company's best performance since its leadership change last April. This achievement has led to the company's shares doubling, outperforming the Nikkei 225 Stock Average by 60 percentage points as of the recent Friday close. This surge represents the most significant lead over the Nikkei since Toyota Motor Co. and Toyota Motor Sales Co. merged in 1982, forming the current Toyota Motor Corp., with share prices adjusted for dividends.
While Toyota's shares have seen accelerated growth this year, it contrasts with electric vehicle giant Tesla Inc. (TSLA, Financial), which has seen a 29% decline. However, with a price-to-earnings ratio of approximately 11 times and a price-to-book ratio of about 1.6 times, Toyota maintains a valuation that is not considered overvalued, either in comparison to other companies on the Nikkei 225 or globally.
As Sato enters his second year as CEO, he faces the challenge of enhancing corporate value amidst the rapidly evolving automotive industry. Factors such as a weaker yen, inventory shortages, and a market shift away from electric vehicles (EVs) have provided a tailwind for Toyota's stock price during Sato's initial year. Bloomberg Intelligence senior auto analyst Tatsuo Yoshida notes these contributing elements but also highlights upcoming challenges, including the aftermath of a safety scandal at some of Toyota's subsidiaries, potential struggles in increasing output or raising prices, and the possibility of a profit outlook reduction in the company's next earnings report.
Reflecting on the performance of Toyota's CEOs over their entire terms, Hiroshi Okuda leads, having outperformed the Nikkei by approximately 106 percentage points during his tenure from 1995 to 1999.
