The growing presence of automotive dealers, along with rising demand for electric cars, are expected to drive growth in the auto dealer industry. Therefore, investors could consider buying auto dealer stocks AutoNation, Inc. (AN), Rush Enterprises, Inc. (RUSHA), and Cars.com Inc. (CARS), which are gaining value.
Substantial investments in new technologies, such as connected cars, electric cars, autonomous cars, etc., by major manufacturers are expected to support the auto dealer market's growth in the near term.
In addition, the growing presence of automotive dealers, coupled with consumer inclination towards a hassle-free buying experience, is anticipated to further enhance the market growth in the coming years.
The US automotive dealership market is expected to reach $257.30 billion, registering a CAGR of above 4% until 2028.
Moreover, governments all over the world are putting in place stricter rules and regulations about emissions, fuel efficiency, and safety. This is driving innovation and leading to the development of new and more advanced automotive technologies.
The global automotive market is expected to grow at a CAGR of 4.5% to $28.70 billion by 2030.
Let’s discuss the stocks mentioned above in detail:
AutoNation, Inc. (AN)
AN operates as an automotive retailer in the United States. The company operates through three segments, Domestic; Import; and Premium Luxury.
On May 2, 2023, AN announced it had entered the Formula 1 race through a partnership with Alpine. The US-based transportation solutions provider will sponsor BWT Alpine F1 Team in the Miami Grand Prix on May 5-7, 2023, in Miami, Florida.
AN’s forward EV/Sales of 0.51x is 57.2% lower than the industry average of 1.19x. Its forward P/S multiple of 0.26 is 70.5% lower than the industry average of 0.88.
During the fiscal first quarter ended March 31, 2023, AN’s new vehicle revenue increased 4.4% year-over-year to $2.93 billion. Gross profit came in at $1.29 billion, while its net income came in at $6.07. Also, EPS increased 5% year-over-year to $6.07.
AN’s revenue is expected to be $6.63 billion for the fiscal second quarter ending June 2023. Its EPS is expected to be $5.78 in the same quarter. Also, it has surpassed EPS estimates in three of the trailing four quarters, which is impressive.
Shares of AN have gained 42.4% over the past year to close the last trading session at $149.16.
AN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Quality and Value. It is ranked #6 out of 21 stocks in the B-rated Auto Dealers & Rentals industry.
Beyond what is stated above, we’ve also rated AN for Growth, Momentum, Sentiment, and Stability. Get all AN ratings here.
Rush Enterprises, Inc. (RUSHA)
RUSHA operates as an integrated retailer of commercial vehicles and related services in the United States and Canada.
RUSHA pays $0.84 annually as dividends. This translates to a yield of 1.41% at the current price, higher than the 4-year average dividend yield of 1.34%.
RUSHA’s forward EV/Sales of 0.61x is 63.9% lower than the industry average of 1.69x. Its forward P/S multiple of 0.48 is 64.5% lower than the industry average of 1.34.
RUSHA’s total revenue rose 22.4% year-over-year to $1.91 billion in the fiscal first quarter that ended March 31, 2023. Operating income increased 18.9% year-over-year to $127.78 million. While its net income attributable to RUSHA per share of common stock remained flat at $1.60, adjusted EBITDA increased 30.7% year-over-year to $560.39 million.
Analysts expect RUSHA’s revenue to increase 8% year-over-year to $1.93 billion for the fiscal second quarter ending June 2023. Its EPS is expected to be $1.53 for the same quarter. Also, it has surpassed EPS and revenue estimates in each of the trailing four quarters.
The stock has gained 33.6% over the past nine months to close the last trading session at $59.53.
RUSHA’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
RUSHA has a B grade for Sentiment and Value. It is ranked #5 in the same industry.
Click here to see RUSHA’s additional POWR Ratings for Stability, Growth, Momentum, and Quality.
Cars.com Inc. (CARS)
CARS operates as a digital marketplace and provides solutions for the automotive industry. Its platform connects car shoppers with sellers.
On March 29, 2023, CARS announced the release of its second annual EV Buying Guide, a comprehensive resource created by industry-leading automotive experts who evaluated 40-plus unique electric vehicles currently on sale.
CARS’ forward non-GAAP P/E of 8.76x is 38.9% lower than the industry average of 14.34x. Its trailing-12-month PEG multiple of 0.30 is 64.9% lower than the industry average of 0.87.
CARS’ total revenue increased 5.6% year-over-year to $167.07 million in the fiscal first quarter that ended March 31, 2023. Also, net income increased 164.5% year-over-year to $11.48 million and EPS increased 183.3% year-over-year to $0.17.
CARS’ revenue is expected to increase 3.6% year-over-year to $168.67 million for the fiscal second quarter ending June 2023. Its EPS is expected to increase 20.4% year-over-year to $0.49 for the same quarter. Also, it has surpassed revenue estimates in three of the trailing four quarters.
CARS has gained 107.7% over the past year to close its last trading session at $19.
CARS’ POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
CARS also has an A grade for Growth and a B in Value, Quality, and Sentiment. It is ranked #2 in the same industry.
For additional ratings for CARS’ Momentum and Stability, click here.
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AN shares were unchanged in premarket trading Monday. Year-to-date, AN has gained 39.01%, versus a 15.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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