A Wide-Moat Industrial Trading Like a Cyclical?

Autoliv (NYSE: ALV) isn’t a flashy stock. It doesn’t benefit from AI buzzwords, viral consumer trends, or speculative growth narratives. Yet it sits at the center of one thing automakers absolutely cannot afford to get wrong: vehicle safety.

Autoliv is the global leader in airbags and seatbelts, supplying nearly every major automaker worldwide. If you drive a car today, there’s a very good chance Autoliv components are inside it. That dominance matters, because safety systems are highly regulated, deeply engineered into vehicle platforms, and extremely difficult to swap out once a supplier relationship is established.

A note from our sponsors...

This creates a business with real staying power … one that looks cyclical on the surface, but behaves more like a durable infrastructure provider over time. This wide-moat safety stock is currently scoring an A or Strong Buy according to our Zen Ratings system, and offers a compelling blend of safety, growth, value, and more. 

A Quietly Wide Moat

Autoliv’s moat doesn’t come from brand recognition or pricing power in the traditional sense. It comes from mission-critical complexity.

Automakers choose safety suppliers years before a vehicle ever reaches production. Once a system is designed, tested, certified, and approved, switching suppliers becomes costly, risky, and time-consuming. That creates deep customer lock-in and long product cycles.

On top of that, safety standards only get stricter over time. More airbags, smarter restraint systems, better crash detection … all of this increases the value of Autoliv’s scale, engineering expertise, and regulatory know-how. Smaller competitors struggle to keep up, while new entrants face enormous barriers.

In other words: this is a wide-moat business hiding inside an unsexy category.

Margin Expansion in a Weak Auto Market

What makes Autoliv interesting right now is how well it’s executing despite a sluggish global auto environment.

The company recently posted record EBIT margins, driven by cost discipline, restructuring efforts, and operational efficiency. Management has already delivered meaningful savings through workforce reductions and manufacturing optimization, and those gains are showing up in profitability.

Even with modest revenue growth expectations, margins are moving in the right direction … a sign that Autoliv has more control over its earnings power than the market gives it credit for.

At the same time, Autoliv continues to gain share with Chinese automakers, a crucial growth lever as China remains the world’s largest auto market and continues to export vehicles globally. Safety content per vehicle also continues to rise, which supports long-term revenue per unit even if overall auto volumes fluctuate.

Capital Returns and Valuation

Autoliv pairs this operational strength with disciplined capital returns. The company pays a solid dividend, buys back shares, and has a long track record of returning excess cash to shareholders.

Yet despite all of this, the stock still trades at a discount to its historical valuation, reflecting investor skepticism around autos more broadly. That skepticism may be understandable (autos are cyclical) but it also creates opportunity.

That’s why ALV is scoring a B for its Value Component Grade, which measures cash flow yield, free cash flow to price, price-to-earnings growth, and more. 

To see our other favorite value names, check out Zen Strategies. Our value portfolio is focused on 21 unique measures of value that pinpoints underappreciated stocks that are ready to rise:

Note: ALV is also scoring a B in its Growth, Safety, and other Component Grades. To see its full score (there are two Components where it scores a C) click here. 

Bottom Line

Autoliv doesn’t need booming car sales to work. It needs vehicles to exist, safety standards to tighten, and OEMs to keep prioritizing reliability over experimentation. Those conditions are already in place.

That’s why ALV is a rare combination: a wide-moat industrial business priced like a cyclical auto supplier. It’s not exciting, but it’s hard to replace. And in a market where many stocks rely on optimistic assumptions, Autoliv’s thesis is refreshingly grounded in reality.

That’s why I’m keeping this one on my watchlist as a play for an industrial / auto rebound. 

Click here to add ALV to your watchlist.

What to Do Next?

• 77 Best Stocks NOW! >
• See All “A” Rated Stocks with +32.52% Average Annual Return >
• 2 New Stocks to Buy from Steve Reitmeister >

Want to get in touch? Email us at news@wallstreetzen.com.