4-Star Stocks Poised to Pop: Lear

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, auto parts supplier Lear (NYS: LEA) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Lear's business and see what CAPS investors are saying about the stock right now.

Lear facts

Headquarters (Founded)Southfield, Mich. (1917)
Market Cap$4.7 billion
IndustryAuto parts and equipment
Trailing-12-Month Revenue$13.16 billion
Management

CEO Matthew Simoncini

Interim CFO Jason Cardew

Return on Capital (Average, Past 3 Years)8.2%
Cash/Debt$1.77 billion / $697.6 million
Dividend Yield1.1%
Competitors

BorgWagner (NYS: BWA)

Eaton (NYS: ETN)

Johnson Controls (NYS: JCI)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 97% of the 70 members who have rated Lear believe the stock will outperform the S&P 500 going forward. These bulls include robertshrestha and MagicDiligence.  

Just last week, robertshrestha listed several of Lear's positives: "Much healthier business after emerging from ch.11, solid cash position, rebounding sales, low P/E, small dividend. Nice turnaround play."

In fact, Lear currently sports a cheapish price-to-cash flow of 6.9. That represents a clear discount to listed rivals like BorgWagner (15.5), Eaton (13.8), and Johnson Controls (33.4).

CAPS member MagicDiligence elaborates on the bull case:

Lear, like many companies in the auto industry, is enjoying a rebirth. ... The company has emerged as a much more attractive entity. The debt load is down to a more manageable $700 million, which is covered over two times by cash ($1.8 billion), and has no maturities until 2018. ... Lear's robust health now is demonstrated by its commitment to return capital to shareholders, with the initiation of a small (1.2%) dividend, and a $400 million share repurchase program, in addition to a stock split earlier this year. ...

Overall, I believe the restructuring and rebound in the auto industry makes this a better area to invest than in the past, and the proliferation of new electronic gadgets and hybrid/electric powertrains create a nice opportunity for this company. My fair value is about $55, representing a nice 30% upside to current trading prices.

What do you think about Lear, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Interested in another easy way to trackLear?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of BorgWarner. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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