In a few years, you’ll likely regret not purchasing this stock while it was still undervalued.

Are you searching for a long-term investment that is undervalued and doesn’t require constant attention? Finding such an option is quite challenging nowadays. Many attractive stocks either lack a clearly optimistic long-term outlook or demand regular oversight, or sometimes even both.

There are a few prospects that meet these criteria and would be suitable for many people’s investment portfolios. One of the most promising among them is a well-known name that’s easily overlooked. That company is a car manufacturer. Toyota Motor ( TM 1.98% ) which Wall Street claims is currently priced over 30% below its true value.

Facing the headwind head-on

Feeling surprised? It would indeed be unexpected if you weren’t. The brand was a giant in the car industry from the 1980s through the 2000s. However, the industry evolved. Competitors improved their offerings, and vehicles, including those made by Toyota, started having longer lifespans, with the average age of cars in the U.S. recently hitting an all-time high of 12.6 years, based on data from S&P Global Mobility. The emergence of the battery-powered car further shaken up the global automobile industry. These are all factors contributing to why Toyota Motor no longer captures attention like it once did.

This situation doesn’t have to be a lasting issue, though. This automotive company has the potential to regain its previous prestige, and rightfully so. In fact, it’s already making progress. For the fiscal year ending in March, Toyota produced an unprecedented 10.3 million vehicles to meet increasing demand. During the three months ending in June, the car manufacturer announced a record-breaking profit of $8.9 billion for that specific quarter of the fiscal year.

Of course, the situation was favorable. The yen is weak For example, inflating the Japanese company’s international income and profits. Additionally, for numerous individuals globally, buying a car has become an immediate necessity that can no longer be delayed.

Overall, Toyota’s recent achievements have largely outweighed any obstacles it faces. Despite the continued high prices of new cars and the absence of fully electric vehicles in its U.S. lineup, where there is consumer demand, Toyota remains committed to its traditional combustion engine vehicles. In both the U.S. and international markets, only about one-third of its production consists of non-combustion-powered vehicles.

In hindsight, it appears that Toyota made a wise decision by being cautious in adopting battery-powered vehicles.

The real future lies with hybrids, not solely electric vehicles.

It’s undeniable that electric vehicles hold a significant position in the automobile scenery. However, it doesn’t exactly match the original vision.

A recent survey conducted by the NORC Center for Public Affairs Research and the Energy Policy Institute at the University of Chicago indicates that only 40% of U.S. drivers are inclined to choose an electric vehicle for their next car, due to logistical and cost-related issues associated with owning such vehicles. Similarly, McKinsey has found that 46% of electric vehicle owners worldwide are considering purchasing a gasoline-powered car for their next vehicle.

What are their main grievances? On a global scale, it’s the lack of comprehension about how electric vehicles operate and their total cost of owning Drivers were also highly concerned about the limited driving range and the inability to charge their vehicles at home.

In this context, Toyota’s dedication to hybrid electric vehicles—those that operate on batteries yet can also use gasoline—appears logical. Actually, the company’s initial intentions to produce and promote a hybrid version (and potentially even more) only offering a hybrid model for each of its cars in the United States is undeniably smart. It’s a balanced choice that many consumers are likely to appreciate.

Indeed, this trend is already evident. In the fiscal quarter ending in June, the sales of the hybrid Toyota Camry saw an impressive year-over-year increase of nearly 143%, while overall Camry sales grew by just 18.6%. This significant rise comes after a 65% increase in hybrid sales in the U.S. during 2023, compared to a smaller 46% rise in non-hybrid EV sales. A similar pattern is emerging in international markets as well.

Expect similar trends in the future as well. According to market research firm Prescient and Strategic Intelligence, the global hybrid market is projected to expand at an annual growth rate of 14.9% until 2030.

It’s hard to picture a major brand like Toyota not taking the lead now that it has perfected the creation and promotion of hybrid vehicles.

Toyota has been working on a hydrogen-powered engine for several years. This could serve as a cleaner alternative to hybrid powertrains. However, let’s start with the basics.

A lot of enduring worth

The overall outlook is certainly optimistic, but is Toyota stock genuinely undervalued and poised for long-term profits? Yes, it is.

That’s the perspective from Wall Street, at least. Analysts have set a consensus price target of $240.81, which is over 30% higher than the stock’s current value. Most of these analysts also view Toyota stock as a strong buy at the moment, with many of them raising their ratings following the stock’s decline from its peak in March.

Despite not having strong support from analysts, Toyota still stands out as a promising investment opportunity. The shares of the company are an An American Depositary Receipt ADR, to be specific, is valued at slightly more than eight times its projected earnings. That’s extremely inexpensive. Additionally, the stock offers a projected dividend yield of 2.2%. While higher yields are available elsewhere, you won’t find them with stocks that have a comparable risk and potential for long-term growth.

Don’t overanalyze this situation. The stock of this excellent automotive company has dropped almost 30% over the last five months, even though the company continues to perform well and there are plenty of reasons to be optimistic about its future being as promising as its past.