Pinned straw:
There’s a lot of interest in ARB from the Strawman community recently now that the share price has fallen 54% from its twelve month high of $40.82 in August 2025 to a 6 year low of $17.61. In November 2021 ARB shares reached an all time high of $54.53
The 5 year share price chart looks tragic!
At just over $18 dollars, the share price looks cheap…but is it a bargain?
Why is ARB trading where it is?
In FY2021 the NPAT margin was 18% and ROE was 23.2%. Fast forward to FY2025 and the NPAT was 13% and ROE 12.7%. What’s in store for this year…and the future?
FY2026 consensus is for revenue of $731 million and NPAT of $86 million (EPS $1.03 per share with 83.7 million shares), making the NPAT margin 11.8%. Current equity is $734 million ($8.77 per share). Coincidently, that puts FY2026 ROE at 11.8% also. That’s half the ROE achieved in FY2021. That’s OK but not amazing. ARB’s quality metrics have deteriorated significantly over 5 years.
What about the future? What needs to change to get ARB performing again? Margins and ROE need to improve while the sales keep growing. How likely is this to happen?
Looking at the 1H2026 results it appears revenue is flat and costs have increased. One of the largest cost increases was materials and consumables which were 4.6% higher pcp. Is this likely to improve? With current inflationary pressures and higher interest rates I don’t think so.
What about sales? Sales were under pressure last half due to a challenging market for 4x4 pick up and SUV sales.
April new car sales data shows that sales are about to get a whole lot worse in 2H2026 for the category ARB is targeting.
Referring to a recent AFR article https://www.afr.com/policy/energy-and-climate/diesel-ute-sales-fall-off-a-cliff-as-fuel-prices-bite-20260505-p5ztwb
“Sales of some of Australia’s most popular diesel utes and four-wheel drives have fallen sharply as the continued spike in fuel prices prompted by the conflict in Iran pushed electric vehicle purchases to another new monthly record in April.”
“The fuel price increase is also stifling consumer interest in large diesel utes and four-wheel drives, with popular models such as Ford’s Ranger and Everest and Toyota’s HiLux and Prado all experiencing substantial falls in year-on-year sales.”
“The biggest loser was the HiLux, which had a 31 per cent drop-off in sales relative to April 2025, followed by the Everest, which lost more than 29 per cent, according to data from the Federal Chamber of Automotive Industries (FCAI) and the Electric Vehicle Council.”
“Overall sales of petrol cars in April were down 30 per cent, while diesel vehicle sales were down 21 per cent.”
My Take
When I look at ARB today, I see more headwinds than tailwinds. If I assume the operating environment does improve slightly and ARB achieves FY2027 NPAT consensus of $1.16 per share, I can calculate a rough value based on that. Using McNiven’s formula assuming equity of $8.77 per share, ROE 13.2% ($1.16/$8.77), 65% payout ratio, dividends fully franked , and requiring a ROI of 10%, I get a valuation of $16. I generally use higher required ROI than 10% so the business doesn’t excite me at the current share price. Nor does the near term for ARB with higher inflation, higher interest rates and higher fuel prices for the foreseeable future.
It’s an avoid for me until there are some signs of recovery.
Discl: Not Held, Not Followed, Cursory Look at Chart Only
@tomsmithidg, as requested. I don't follow ARB, so have zero clue of the business. The following is a 20 min look at the ARB chart for the very first time ....
As @Rick points out, it is a pretty nasty looking chart ...
Have included 2 views - the first chart is a 7 year view going back to 2019. The second chart below goes back 13 years to 2013 - had to go back that far to look at potential downward levels from here.
Some quick observations:
- Long term trend is clearly down, current intermediate and short trend is steep down!
- Between Feb 2024 and Mar 2025, a bearish Head and Shoulders pattern looks to have formed. The price decline target of that pattern looks to have been met in Feb 2026 at $24.85
- Coincidentally, this $24.85 has been a historical support area going back to Aug 2020, Jun 2022, Dec 2022, then Jan 2026 - the price lingered around this level for a while in Feb 26, then resumed its downward trend since
- $19.76 to $20.78 should have been a decent support area - lots of times since 2018 that rallies stopped out in this zone. There was a bit of churn in this zone in early April, then it dropped again - quite expected as holders cut losses and those that missed out previously at these levels look to jump back in
- Have marked the next 4 levels DOWN: $18.27 (currently here, but I can't quite see this holding), then $16.43, then $14.37, then $10.46. Each of these price levels has been quite robustly tested on the way up and down going back to 2015, so I would have quite a bit of respect for these levels given how far back they go. I would expect there to be some churn at each of these levels before moving to the next level up or down
- If the price reverses from current levels, then the next 4 levels UP are: $19.76 to $20.78, then $23.96, then $24.85, then $27.78 - similar to the lower levels, each of these levels have been tested before, up and down
- I can't quite see any sign of the current steep decline reversing course. If the steep decline continues unabated, would be prudent to not rule out ~$10.46 as a potential long-term floor.
No idea how this lines up with the overall business performance and narrative - would be good to get a perspective on this to see if the above lines up.
Hope this helps!
