Subaru has developed a cult following in the U.S. with its rugged all-wheel-drive vehicles like the Outback and Forester. If only its stock had the same following.
Many investors don't realize that the Japanese auto maker is publicly traded, with a market value of $11 billion.
The U.S.-listed shares of the cash-rich company look like a bargain, trading below $8. The stock is down about 25% this year and more than 50% during the past 10 years.
"For Subaru customers, buying a car is like a political or religious experience," says Cole Smead, co-manager of the Smead International Value fund, which holds the stock.
The company's marketing campaign is built on what the auto maker calls its Subaru Love Promise, which reflects its vision to "show love and respect for everyone." It was early, for instance, in courting the LGBTQ community.
Smead says the stock has potential to double or triple -- not on love, but on business merits. "It's a better business than many investors appreciate, and the stock is cheap on earnings and certainly book value, " says Matthew Fine, manager of the Third Avenue Global Value fund, which holds the stock.
The weak stock price reflects a profit drop in the company's latest fiscal year caused by U.S. tariffs and higher material costs.
The stock trades for about 10 times projected earnings in the company's fiscal year ending in March 2027 and for about 70% of tangible book value.
The U.S. shares are reasonably liquid, with average daily volume of more than 300,000 shares a day. And, like the stocks of many smaller foreign companies, it trades on the OTC Markets rather than the NYSE or Nasdaq.
Subaru's price/earnings ratio is consistent with the low valuation of other global auto makers.
A couple things are going right for Subaru and distinguish it from its Japanese peers.
Subaru sees financial improvement in the current year, and has set a goal of doubling its return on equity to 10% by 2030, which would translate into much higher profits. Current earnings are half of what the company generated in fiscal 2025.
Subaru has a great balance sheet. It's sitting on about $6 billion of net cash and equivalents, or more than half its market value.
Like many Japanese companies, Subaru is getting more shareholder friendly. When the company reported full-year results in May for its fiscal year ended March 31, it indicated that cash levels wouldn't rise further, and it set a buyback for almost 10% of its stock that it plans to complete in the current fiscal year ending in March 2027. It also pays a 4% dividend.
Sooner or later, Fine says, Subaru may be acquired by Toyota, its largest shareholder at 21% and its manufacturing partner, as part of what Fine sees as needed consolidation in the fragmented Japanese auto industry. The consolidators would be Toyota and Honda, which each have relationships with different affiliated auto makers. Toyota is aligned with Subaru, and Honda with Nissan.
Subaru is better positioned than its Japanese rivals because it has virtually no exposure to China. The company gets 70% of its annual vehicle sales of about 900,000 in the U.S., and produces about half the cars sold in the U.S. from an Indiana plant. The company's U.S. market share is around 4%, and is higher in the Pacific Northwest and New England. Its share in Vermont is above 10%.
The company has done a good job of refreshing its car lineup, including an overhaul of its Outback crossover SUV this year and the introduction of a Forester hybrid in 2025. Subaru has kept prices reasonable on key models, with the Crosstrek base price unchanged in the 2027 model year at just under $27,000. One sign of Subaru's appeal is that it doesn't need to advertise much -- like Tesla.
Japanese auto makers are under pressure from technologically advanced, low-cost Chinese competitors like BYD that are taking share in China and throughout the developing world.
Fine says another plus with Subaru is that it lacks a captive finance unit to offer loans to carbuyers. JPMorgan Chase provides that financing.
BMW and other big auto makers keep large amounts of cash on their balance sheets to support their finance businesses -- something Subaru doesn't need to do. That gives Subaru more financial flexibility.
Subaru had earmarked substantial capital expenditures to develop electric vehicles, but scaled that back when it moved to partner with Toyota on EVs.
Fine says that was a right move, given the limited demand for EVs in both the U.S. and Japan. Subaru's customer base is skewed toward rural areas where range issues with EVs are an issue for buyers. Subaru's Trailseeker EV is generating minimal sales -- fewer than 1,000 cars in June.
Fine points out that the Subaru Forester's specs -- size, engine, and price -- are comparable with the Toyota RAV4 as well as the Honda CR-V and Nissan Rogue. It makes little sense for different Japanese auto makers to be selling very similar vehicles, he argues.
"If it merged with Toyota, Subaru could operate far more efficiently." Toyota is a much larger company that sells about 10 million vehicles annually and has a market value of $250 billion.
Few car companies have the brand loyalty of Subaru. Investors can buy shares of the car maker at a bargain price at a time when Subaru is more focused on shareholders. There's a lot to love about Subaru cars -- and its stock.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 16, 2026 09:59 ET (13:59 GMT)
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