Lithia's Fundamentals Match Up Well With Rivals


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For the past two years,Lithia Motors ( LAD ) has delivered strong earnings and revenue gains.

In 2010-11, earnings surged 69% and 112% on revenue growth of 16% and 27%. The Street expects a 39% pop in this year's EPS while revenue advances 21%.

The Oregon-based company operates automotive franchises of new and used vehicles and services. As of July, Lithia had 85 stores in 11 states along with a website.

In the most recent quarter, new vehicles accounted for about 56% of total revenue.

Second quarter earnings grew 41%. The Street had expected 17% growth. Q2 revenue jumped 26%.

The fundamentals for Lithia are best considered in context. The Retail-Wholesale Automotive group includes some chains that sell only used vehicles. Lithia sells both new and used, and four other companies in the group have a similar profile.

So let's look at the data vs. similar companies.

Lithia's pretax margin was 3.2% last year, its best since 2005.AutoNation ( AN ) came in at 3.4%, Ashbury Automotive ( ABG ) at 2.2%,Penske Automotive ( PAG ) at 2.2% andSonic Automotive ( SAH ) at 1.7%.

Return on equity, a gauge of financial efficiency, was 15.3% last year at Lithia. AutoNation was 14.4%; Ashbury, 19.3%, Penske, 15%; and Sonic, 16.9%.

Lithia's five-year earnings stability factor is 39 on a scale of 0 (calm) to 99 (erratic). AutoNation's is 23, Ashbury's 51, Penske's 40 and Sonic's 47.

Operating cash flow per share was 36% greater than EPS at Lithia. AutoNation was 42%; Ashbury, 58%; Penske, 32%; and Sonic, 89%.

The annualized dividend yield for Lithia is 1.3%. AutoNation and Ashbury do not pay dividends. Penske's dividend yield is 1.7%, and Sonic's is 0.5%.

Lithia leads the pack overall with a Composite Rating of 96. Penske is next at 94; Ashbury, 90; AutoNation, 89; and Sonic, 81.

On Thursday, Lithia cleared a 30.10 buy point in a tight consolidation. The pattern could be seen as a three-weeks-tight or a square box. The entry is the same regardless. Volume was 21% Thursday but came in heavy Friday. The buy zone is up to 31.61.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance Investing Ideas
Referenced Stocks: ABG , AN , LAD , PAG , SAH

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