GoodYear Tire & Rubber is ugly, ignored, but not completely dead in the waters.
*I am just trying to sharpen my analytical skills. My reports are designed for informational purposes only and do not constitute investment advice. Do your own due diligence and contact a professional before investing.*
EV: 10.87B, trailing P/E: 5.12, P/S: 0.14, P/B: 0.84, profit Margin: -9.44%, Ret on Equity: -42.19%, Net loss: -1.73B.
https://preview.redd.it/75loh8g1wv5g1.png?width=2391&format=png&auto=webp&s=e2b1103d208437ec7c8c2219debe12b1e3eb913b
Goodyear Tire and Rubber, one of the world’s oldest and most iconic tire companies, also ranks as the third-largest tire manufacturer globally. **But competitive pressure from Chinese manufacturers' low-cost efficient production has been particularly damaging to its bottom line.**
In fact, the company’s debt-laden capital structure is now marred by decades of failed corporate bureaucrats’ acquisition-driven growth plans that have merely saturated the company's balance sheet with debt and justified corporate officers' juicy pay and benefits packages.
**For instance, during his final year as Chairman in 2023, former CEO Richard Kramer was paid a staggering $14.7 million while the company incurred $689 million in losses.**
In contrast, Florian Menegaux, the CEO of Michelin, received a total compensation of $3.26 million in 2024. Similarly, Shuichi Ishibashi, the CEO of Bridgestone Global, earned just $1.89 million in 2024 while Bridgestone has consistently maintained its position as the largest and most profitable tire manufacturer globally. Notably, both Michelin and Bridgestone are dividend-paying stocks.
https://preview.redd.it/7hp01i6rtv5g1.png?width=1913&format=png&auto=webp&s=518b8eea1c56a7e6409fdd6b2b2d11ba840c25e8
**For nearly a decade, Kramer, a CPA by training, mismanaged the company while leading it to a decline in its market share, simultaneously granting himself lavish pay and benefit packages.**
**In addition to Chinese entrants in the tire sector, Goodyear’s competitive edge has also been impacted by renewed pressure from its better capitalized international brands such Michelin, Sumitomo, Bridgestone, and Pirelli.**
**On the positive note, Goodyear boasts a legacy brand with a leading position in a core essential service sector. The brand’s recognition as a quality tire manufacturer and its popularity among customers stem from its long-standing relationship with manufacturers since the days of Henry Ford's Model T.**
**David Tepper’s Appaloosa Management’s recent stock accumulation can be seen as a vote of confidence in management turn around plan, and may even spark retail interest in the company.**
[Undervalued metrics or justifiable underperformance?](https://preview.redd.it/d31k5d5jvv5g1.png?width=3173&format=png&auto=webp&s=d919dffa2a41cba8b8e6e6288acdbbc2bdb139b0)
Given the company’s substantial liabilities and debt load, further debt restructuring efforts are expected. Shareholders have been sacrificed for far too long, and a turnaround strategy is crucial to improve owner equity.
Mark Stewart’s $24M pay package for 2024 must therefore be " earned" with stockholders' capital gain. The $3B net equity on total assets of $20B input a more aggressive asset divestiture plan and renewed focus on customer satisfaction and profitability.
The company’s depressed shares are therefore poised for a turnaround if corporate officers uphold their commitments in cost reduction and net income maximization.
**In conclusion:**
**At $8/share, the stock is fairly valued considering the current market downside volatility and the lingering effects of decade-long corporate misaligned strategy in an industry exposed to Chinese low-cost alternatives such as Zhongce rubber Group, Giti Tire, Sailun group, and the Koreans Kumho and Hankook tires.**
**A turnaround is probable given the company’s legacy brand and revenues. In fact, a retail meme fervor could easily ignite a fire under the shares, pushing equities to relative highs.**
**Should Goodyear ($GT) get acquired?**
**Current valuation warrants serious consideration from private equity given management's strategic commitment to optimizing its portfolio, cutting down debt, and improving margins. However, the company's legacy of overpaid " technocrats" demands a radical approach. Basically, investors are fed up with the old " turnaround" tale designed to gaslight the public and secure execs' compensation package over shareholders' returns: Asset stripping, layoffs, vanity projects...At this juncture, firing the overpaid execs and truly thinning off the balance sheet fat is necessary to salvage the company's legacy.**
**Overall, the stock warrants a speculative buy grade. A radical change in executive culture is necessary, warranting either an acquisition or going going-private restructuring.**
**Estimated Fair Value: $12/share.**
Going private estimation: $18/share.