Bargain Alert: I More Than Doubled My Position in a Brand-Name Turnaround Stock That's Trading at a 37% Discount to Its Book Value

Wall Street's major stock indexes have all vaulted to several record highs in recent years -- and so have valuations. With the S&P 500's Shiller Price-to-Earnings (P/E) Ratio entering 2026 at its second-priciest valuation in 155 years, I, like Warren Buffett prior to his retirement, have been a net seller of equities for several quarters.

Though I've been building up my dry powder for significant stock market corrections, I have found a bargain or two worth pouncing on. One of my newest buys is a brand-name company that's shed 71% of its value since January 2022: Goodyear Tire & Rubber (NASDAQ: GT).

Image source: Getty Images.

Goodyear Tire will be treading uphill for the next couple of quarters

While investors seemingly can't get enough of artificial intelligence stocks, I more than doubled my position (which remains relatively small) in Goodyear between $6.28 and $6.50 per share in mid-March.

To be upfront, Goodyear Tire & Rubber isn't without its potholes. The Iran war could prove challenging in the short term, courtesy of skyrocketing crude oil prices. Since most tires are produced from petroleum-derived products, higher oil prices are likely to drive up the cost of rubber, which isn't particularly good news for Goodyear over the next couple of quarters.

Goodyear's 2025 full-year operating results didn't impress, either. Tire units sold in all three regions (Americas, EMEA, and Asia Pacific) declined from the previous year, with its operating margin also shrinking. Though Goodyear blamed a "sharp contraction" in demand from its Commercial segment in the Americas, President Donald Trump's tariffs also haven't done the company any favors.

While high rubber prices, Iran war uncertainty, and tariffs may weigh on Goodyear's results throughout 2026, the longer-term risk-versus-reward profile leans heavily to the latter.

Image source: Goodyear Tire & Rubber.

Goodyear has been wheelin' and dealin'

I'm a big fan of turnaround candidates and spotting price dislocations that are hiding in plain sight. Goodyear fits that mold perfectly.

Pardon the apropos pun, but the wheels of Goodyear's operational turnaround were put into motion in November 2023. The "Goodyear Forward" plan involves divestitures of non-core assets, operational cost-savings, and a focus on higher-margin products.

Goodyear has successfully divested three of its ancillary operations. It sold its chemical business to an affiliate of Gemspring Capital Management for $650 million, the Dunlop brand to Sumitomo Rubber Industries for $735 million, and its off-the-road tire operations to Yokohama Rubber Company for $905 million. Collectively, Goodyear banked around $2.3 billion from its divestitures, which it primarily used to lower its outstanding debt.

GT Net Total Long Term Debt (Quarterly) data by YCharts.

It's also surpassed its initial cost-cutting expectations laid out in November 2023. Supply chain and purchasing adjustments, paired with plant optimizations, helped Goodyear reach a $1.5 billion run rate cost-saving benefit by the end of 2025.

Additionally, Goodyear Tire is leaning into its prime positioning in the higher-margin replacement tire market. Consumers hanging onto their vehicles longer than ever before, coupled with electric vehicles wearing out tires faster than similar gas vehicles, puts Goodyear in the driver's seat.

But it's Goodyear's valuation that enticed me to act. The company's forward P/E was just 6 when I purchased shares on March 18-19, and it's currently trading at a 37% discount to its book value. Though it's unlikely Goodyear shares will be burning rubber anytime soon, the company's stock is in pole position to double within the next five years.

Sean Williams has positions in Goodyear Tire & Rubber. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.