Volkswagen (VLKAY) is the largest automobile manufacturer in Europe. Their activities focus on the automotive market and they offer products and services along the entire automotive value chain. With nine independent brands, they are able to offer a unique range of models from the extremely efficient 3-litre car to the great sporting tradition of Bentley. While each of the brands has a distinct personality, it also benefits from its membership of the Volkswagen Group with its global manufacturing base.

For several years now, the company has stood as a symbol of the bad that occurs when a company becomes to focused on the bottom line and loses moral and ethical perspective. VW was on the verge of being one of the largest vehicle manufacturers in the world with cars for all classes, from the Porsche enthusiast to the economy car driver.

But, demands for highly-efficient diesel vehicles capable of meeting ever-more stringent environmental regulations led to a huge scandal as company engineers corrupted pollution-control software so they vehicles could pass emissions inspections in the garage. VWs looked good on paper, but once they were on the road they were dirty diesel vehicles, not quite "rolling coal" like a southern pickup driver with a defeat device installed, but with the same overall effect.

When the scandal was revealed, the company took a huge hit to their stock price as they were forced to endure a massive blow to their credibility AND pay massive settlements to government regulators that hit their bottom line for billions of dollars.

Paradoxically, when their stock price tanked our models became more enamored of the company. This is because we use past stock price behavior and underlying earnings data to determine our rankings rather than subjective reads of the news cycle and current events. As we have pointed out in the past, our models did not know the company was embroiled in a PR and regulatory nightmare. So, as the price fell, the company looked even MORE attractive due to the underlying fundamentals. Other recent examples of this phenomena include the BP oil spill and the United Airlines overbooking fiasco in Chicago.

Now, analysts are arguing that VW may have weathered the worst of the defeat device scandal and is now posting numbers indicating that they are as profitable--or almost as profitable--as their peers. This may be good news for investors as the company still retains all of the assets that made it a BUY before the scandal broke.

Today's Wall Street Journal reports that the company is showing a decent operating margin of 4.6% for Q1 which puts it on par with smaller manufacturers in France like Peugeot and Renault. That margin doesn't approach the numbers posted by US giants such as Ford and GM, but that is because VW makes cars central to their business rather than larger trucks and SUVs.

Of course, it remains to be seen whether or not the company has truly moved beyond the damage caused by their engineering and management teams' moral and ethical lapses, but for now, the latest numbers look encouraging. As you can see from the chart below, we have had a BUY on the company for a while now. Perhaps--as the latest profit margin metrics indicate, they have really turned the corner.

Below is today's data on Volkswagen (VLKAY):

Recommendation: ValuEngine continues its BUY recommendation on Volkswagen for 2017-05-02. Based on the information we have gathered and our resulting research, we feel that Volkswagen has the probability of outperforming average market performance for the next year. The company exhibits ATTRACTIVE Company Size and P/E Ratio.

Valuation & Rankings
Valuation	9.18% undervalued	Valuation Rank	76
1-M Forecast Return	1.03%	1-M Forecast Return Rank	98
12-M Return	1.51%	Momentum Rank	37
Sharpe Ratio	-0.04	Sharpe Ratio Rank	43
5-Y Avg Annual Return	-1.27%	5-Y Avg Annual Rtn Rank	42
Volatility	33.17%	Volatility Rank	49
Expected EPS Growth	6.52%	EPS Growth Rank	32
Market Cap (billions)	47.51	Size Rank	98
Trailing P/E Ratio	7.68	Trailing P/E Rank	97
Forward P/E Ratio	7.21	Forward P/E Ratio Rank	94
PEG Ratio	1.18	PEG Ratio Rank	40
Price/Sales	0.20	Price/Sales Rank	94
Market/Book	1.48	Market/Book Rank	67
Beta	1.58	Beta Rank	18
Alpha	-0.22	Alpha Rank	20