Lithia's Fundamentals Match Up Well With Rivals

Posted

Referenced Stocks:ABG;AN;LAD;PAG;SAH

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.