Could Aston Martin enter the FTSE 100?

Aston Martin (LSE: AML) has never been in FTSE 100 index. The carmaker was close to the threshold when it launched in 2018, but its share price fell, then fell even more.

The British marque was worth £4.3bn when its shares started trading on the stock market in October 2018 at £19.

However, the stock has fallen sharply since the IPO. At the time of writing, it was trading at just £2.17. And after the positive results sent the stock rising higher this week.

So, let’s take a closer look at Aston Martin, and explore whether it can make the blue-chip index.

The lofty target is still unattainable

Entrepreneur and chief executive Lawrence Stroll has ambitious plans for the iconic car brand. It previously said it wanted to increase production to 10,000 cars a year by 2024/25, up from 6,600 in 2021.

With a focus on the ultra-luxury market as well as on DBX SUV, the chairman wants to achieve £2bn in profits and £500m in adjusted EBITDA by 2024/25.

However, Aston is still far from Stroll’s target. In the 12 months to December 31, revenue rose to £1.38bn, up from £1.09bn. The company made a pre-tax loss of £495m, while net debt fell to £765.5m from £891.6m a year earlier.

A pound too, partly engendered by Liz Truss’s mini budget, contributes to losses as debt repayments climb. The debt is held in dollars and the tumbling pound makes the interest more expensive.

The turning point?

Q4 was positive with good car makers making profits. The company made a narrow operating profit of £6.6m in the last three months of the year. This is achieved largely through higher average selling prices for cars. In Q4, Aston achieved an average selling price of £184,000, up from £152,000 last year.

The results were well received by investors as the share price rose as much as 15% in early trading.

Investors will also be encouraged by further comments. Aston has been chasing higher limits for some time, and it’s the former Ferrari boss Amedeo Felisa was CEO last year – a Ferrari margin that is the envy of all carmakers.

Aston says its next-generation sports car and limited-edition luxury cars will have a 40% profit. As such, the Warwickshire-based business expects to hit its 2025 target of sales of just 8,000 cars a year, down from the Stroll’s target of 10,000. In 2022, it sold 6,412 vehicles.

Should I buy Aston shares?

Well, I already own a stock in a car factory. However, and this may surprise some, I am looking to buy more. I am very encouraged by this week’s data and comments – chief financial officer Doug Lafferty said that “very confident“To achieve the 2025 goal.

Join the FTSE 100? Well, that would require the stock price to more than triple. It is not impossible, but it seems unlikely in the next few years, especially with the market sentiment is quite poor towards the firm. But if EBITDA of £500m is achieved, the £4.5bn valuation will not be worth more than the rest of the index.

Finally, I appreciate this speculation, but perhaps the strong performance of the Aston Martin F1 this year’s team – and they are looking good – can have a positive impact on the sales of sports focused on the US.