Is the Aston Martin share price dip a buying opportunity?

Since just last week, the Aston Martin Lagonda Global Holdings (LSE: AML) share price has fallen by almost 19%.

Even in a weak market, that seems like a big step. So, is the dip a buying opportunity for investors?

Let’s start by putting perspective down. With a share price of close to 242p, the luxury sports car maker is about 26% cheaper than a year ago.

But investors are happy to report full-year results this month. And the stock moved almost 50% higher on the release. So the stock has been volatile.

But it should be noted that the company is currently not making a profit. However, City analysts are predicting smaller losses for this year and next. And the company’s annual revenue has grown.

There may be profits ahead

If the trend continues, the business could be profitable in the coming years. However, there is a lot of debt on the balance sheet. And without income, interest on debt can be a problem.

Therefore, it is not good if the business has cyclical characteristics. And the ongoing general economic downturn could cause companies to become dizzy.

This month’s full-year report showed a year-over-year loss for 2022. But there was a strong performance in the fourth quarter. And revenue is higher, with directors reporting strong demand across the company’s product portfolio.

About 80% of the current GT / sports car range is already on sale by 2023. And the business is able to overcome the supply chain disruptions that characterized the economic landscape last year.

Looking ahead, the company said it expects significant growth in profit in 2023 compared to 2022. And that means reducing losses. City analysts have pegged a net loss of £152m.

But if the result comes to pass, it will be a huge improvement on the nearly £528m business it lost in 2022.

The continued strength of the brand is key

Directors said the improved conditions will be driven by increased volumes and higher gross margins in core and specialty vehicles. Capital expenditures appear to peak in 2023. And positive free cash flow should occur in the second half of the year.

Meanwhile, without income it is difficult to value a business. However, price-to-book is not outrageous at the current level of around 2.3.

But in the future, profits may come. And it can happen quickly if there is a click for the company.

Brand strength is key to future performance. And as long as customers continue to see the car as special, I think the business can build on new results.

Therefore, recent stock weakness could be a buying opportunity. But with a loss-making operation like this, thorough research is essential before buying a stock.

Investors need to build confidence in the potential of the business in order to sustain it for the long term. But I think this month’s positive results report is reason enough to look deeper into the situation.