Forvia stock went into this earnings season trading at a steep discount, with a P/S ratio around 0.1x compared with higher industry levels and a 90 day share price decline of about 11%. The main takeaway from these results is not the income statement but the strain on the balance sheet and the reliance on future improvement to relieve it.

Management reported net cash flow of €432m in the first half, progress on lowering net debt to €5.5b and a leverage ratio of 1.6x. That cash and deleveraging story is what the market is now weighing against the recent share price weakness.

Is Forvia trading at a genuine deep discount, or is the low P/S ratio simply compensation for weak earnings and financing risk? Compare the current share price…