The expanding travel and tourism industry, rising business and corporate travel trends, and the growing demand for rental cars in emerging economies fuel the auto industry. Given the industry’s steady growth prospects, investors could consider quality auto stocks Group 1 Automotive, Inc. (GPI), Copart, Inc. (CPRT), and Stellantis N.V. (STLA) for potential gains.
The automotive market is expected to keep growing in the coming years because of the rising demand for personal and commercial vehicles, the rise of new technologies like electric and self-driving cars, and increasing infrastructure investment.
The global automotive market is expected to grow at a CAGR of around 6.9% until 2030.
Moreover, a shift to EVs is inevitable, and EV vehicle sales are expected to rise sharply and dramatically outpace sales for hybrid vehicles. This is evident as more automakers are producing EV vehicles, increasing consumer demand, and a wider range of non-luxury EVs is improving affordability.
Furthermore, the increasing number of domestic and international travelers seeking convenient and flexible transportation options has escalated the demand for car rental services. The market is also driven by the growing demand for rental cars in emerging economies, where car ownership is lower and public transportation systems are less developed.
The global car rental market is projected to reach a value of $95.7 billion by 2028 at a CAGR of 3.1% .
With these favorable trends in mind, let's delve into the fundamentals of the three best Auto Dealers & Rentals stocks, beginning with the third choice.
Stock #3: Group 1 Automotive, Inc. (GPI)
GPI operates in the automotive retail industry in the United States and the United Kingdom.
GPI’s trailing-12-month ROCE of 26.24% is 134.8% higher than the 11.77% industry average. Its trailing-12-month ROTA of 8.73% is 120.1% higher than the 3.97% industry average.
For the fiscal third quarter that ended September 30, 2023, GPI’s total revenues increased 13% year-over-year to $4.71 billion, while its gross profit increased 4.5% year-over-year to $786.20 million. Its income from operations stood at $261.60 million. Also, its adjusted earnings per common share from continuing operations stood at $12.07.
Analysts expect GPI’s revenue to increase 9.5% year-over-year to $17.77 billion for the year ending December 2023. Its EPS is expected to come in at $45.39 for the same period. It has surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
Shares of GPI has gained 55.5% year-to-date to close the last trading session at $280.55.
GPI’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 an A grade for Value. It is ranked #4 out of 21 stocks in the Auto Dealers & Rentals industry.
Click here to see the other ratings of Growth, Stability, Momentum, Sentiment and Quality.
Stock #2: Copart, Inc. (CPRT)
CPRT provides online vehicle auctions and remarketing services globally, connecting various stakeholders, including insurers, banks, dealers, and the public. Their services encompass vehicle processing, inspection, reporting, and parts sales, facilitating transactions for licensed dismantlers, dealers, and the public.
On October 10, 2023, CPRT announced a new strategic investment and partnership with Purple Wave, Inc., an online offsite heavy equipment auction company.
CPRT’s trailing-12-month ROCE of 23.52% is 92.3% higher than the 12.23% industry average. Its trailing-12-month ROTA of 18.06% is 267.8% higher than the 4.91% industry average.
For the fiscal first quarter that ended October 31, 2023, CPRT’s total service revenues and vehicle sales increased 14.2% from year-ago quarter to $1.02 billion, while its gross profit increased 25.6% year-over-year to $464.02 million. The company’s net income came in at $332.53 million and $0.35 per common share, representing an increase of 35.3% and 34.6%, respectively, from the prior-year quarter.
The consensus revenue estimate of $1.03 billion for the fiscal second quarter (ending January 2024) represents a 8.2% increase year-over-year. The consensus EPS estimate of $0.35 for the current quarter indicates a 13.9% improvement year-over-year. The company has an impressive surprise history, surpassing the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 65% year-to-date to close the last trading session at $50.22.
It’s no surprise that CPRT has an overall rating of B, which equates to Buy in our proprietary rating system.
CPRT has an A grade for Quality and a B in Stability and Sentiment. Within the same industry, it is ranked #5.
In addition to the POWR Ratings we’ve stated above, we also have CPRT’s ratings for Momentum, Growth, and Value. Get all CPRT ratings here.
Stock #1: Stellantis N.V. (STLA)
Headquartered in Hoofddorp, the Netherlands, STLA designs, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems worldwide. It offers its products under the Abarth, Alfa Romeo, Chrysler, DS, Dodge, Jeep, Fiat, Maserati, Ram, Opel, Lancia, Vauxhall, Peugeot, Comau, and Teksid brands.
On October 26, 2023, STLA and Nauto, a leading provider of AI-based vehicle safety technology for commercial fleets and the automotive sector, announced that Nauto's AI-powered vehicle safety solution was available for STLA commercial fleet customers in the U.S.
STLA’s trailing-12-month ROCE of 27.85% is 149.2% higher than the industry average of 11.17%, while its trailing-12-month ROTA of 9.95% is 150.8% higher than the industry average of 3.97%.
STLA’s net revenues for the six months ended June 30, 2023, increased 11.8% year-over-year to €98.37 billion ($108.06 billion). Its net profit increased 37.2% year-over-year to €10.92 billion ($12 billion). Its adjusted operating income rose 11% year-over-year to €14.13 billion ($15.52 billion). The company’s EPS came in at €3.45, representing an increase of 39.7% year-over-year.
Street expects STLA’s revenue to increase 9.7% year-over-year to $208.91 billion for the year ending December 2023. Its EPS is expected to grow 19% year-over-year to $6.57 for the same period. It has surpassed revenue estimates in all four trailing quarters.
STLA’s shares have gained 41.8% over the past year to close the last trading session at $21.57.
STLA’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Stability and Sentiment. Within the same industry, it is ranked #4.
Beyond what is stated above, we’ve also rated STLA for Growth and Quality. Get all STLA ratings here.
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STLA shares were trading at $21.70 per share on Thursday morning, up $0.13 (+0.60%). Year-to-date, STLA has gained 52.82%, versus a 20.06% 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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