Johnson Controls Stock Is Going Nowhere. Here's Why.

Sales at America's automakers have been going great guns these past few quarters, and you'd think that would be great news for the companies that make parts for all these shiny new autos. In some cases, you'd be right to think that. But in at least one case -- the case of Johnson Controls stock -- you'd be very, very wrong.

Shares of auto-parts makers such as Lear and Magna International have rocketed this past year, outperforming the S&P 500 with 46% and 56% returns, respectively. Yet Johnson Controls stock has lagged the market average by more than five points. Why?

Three reasons.

Johnson Controls stock is worse than average
Turns out that when you stack up Johnson Controls stock against its two smaller rivals, there's precious little to recommend it. Johnson Controls' P/E ratio of 27.8 is no bargain. It's more than twice the cost of a share of Magna (which costs 10.5 times earnings), and nearly six times the cost of Lear, which sells for only 4.7 times earnings.

Worse, when you lay the three companies side-by-side, you can plainly see that Johnson generates far lessreal cash profit than its rivals do. Its free cash flow yield is the worst of the bunch:

JCI Free Cash Flow Yield data by YCharts

Johnson Controls grows too slow
Johnson Controls stock is no great shakes when valued on more traditional "GAAP" earnings, either. Fact is, over the past five years Johnson Controls stock is the only one of the three that has seen earnings actually decline:

Johnson Controls stock is going nowhere
Of course, there's still the old investing truism to consider -- that investing isn't about what a stock has done in the past, but what it might do in the future. Problem is, despite the shrinking earnings that are giving it a smaller earnings base to grow from in the future, Johnson Controls stock is still expected to be the slowest grower of the group:

So once again, we find Johnson Controls stock occupying last place in a losing race.

Now admittedly, Johnson isn't all bad. It does, for example, pay the biggest dividend of the three companies, at 2%. But Magna pays nearly as big a dividend, is growing faster, and costs less. Lear, while paying the smallest dividend of the group (1.1%), is growing fastest and therefore has the most potential to grow its dividend in the future. Plus, at 4.7 times earnings, it's a heck of a lot cheaper than Johnson.

That's why, on balance, I see little reason to prefer Johnson Controls stock over its rivals. In the coming years, I expect to see Johnson Controls stock go exactly nowhere.

Johnson Controls is a big-league provider of parts and services to companies such as Ford and Toyota and is very well positioned to grow with China's economy. The company is perhaps best known among investors as a maker of batteries for cars, including the lithium-ion battery packs used in electric cars and the most advanced hybrids. This space has gathered a lot of investor interest, but is JCI the best way to play it? The Motley Fool answers this question and more in our most in-depth Johnson Controls research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.

The article Johnson Controls Stock Is Going Nowhere. Here's Why. originally appeared on Fool.com.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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