The automotive industry is expected to grow due to technological advancements and rising consumer demand. Investors could therefore benefit from fundamentally sound auto dealer stocks such as Copart (CPRT), Penske Automotive Group(PAG) and Rush Enterprises(RUSHA). These stocks are performing well, despite macro-headwinds. Continue reading.
Automotive industry investments are increasing rapidly in new technologies such as electric cars, connected cars, and autonomous cars. Although macroeconomic headwinds continue, stocks with strong fundamentals such as Copart, Inc., Penske Automotive Group, Inc., (PAG), Rush Enterprises, Inc., (RUSHA), could prove profitable.
Online automotive sales are booming due to the increasing number of auto dealers and consumer preferences for seamless purchases.
Global online car sales are expected to grow at a 12.2% CAGR by 2030.
Online car shopping has become more popular in recent years. Retailers offer end-to-end purchases through their online stores. Online car platforms provide customers with many benefits such as greater transparency in pricing, convenience to shop from home and digital payment.
The global automotive market will also reach $28.7 Billion by 2030 at a CAGR 4.5%. This is due to the increasing demand for commercial and personal vehicles, as well as technological advances.
Investors could consider buying the fundamentally strong auto dealer stocks CPRT PAG and RUSHA.
Copart, Inc. (CPRT)
CPRT offers online auctions and vehicle remarketing worldwide. It provides a variety of services to process and sell vehicles online through its third-generation virtual bidding internet auction-style technology.
CPRT's EBIT margin of 37.42% for the 12-month trailing period is 289.9% higher than industry average. Capex/Sales at 11.92% for the trailing-12 months is 312.44% higher than industry average of 2.89%. Its 29.45% net income margin for the trailing 12 months is 3436% higher than industry average.
CPRT’s total revenue from service and vehicle sales in the second quarter ending January 31, 2023 increased by 10.3% over the previous year to $956.72 millions. The company's nonGAAP net profit increased 10.4% over the past year to $293.56 millions. The company's non-GAAP EPS was $0.61, which represents a 10.9% rise from the previous-year period.
CPRT is expected to grow its EPS to $0.64 per share and its revenue to $1.00 billion for the quarter ending April 30, 2023 by 8.9% and 6.8%, respectively. The company has an impressive track record of earnings surprises, having exceeded consensus estimates for EPS in three out of the last four quarters. The stock closed the last trading day at $77.76, up 37.7% over the past year.
The POWR ratings of CPRT reflect its strong fundamentals. The stock's overall rating is B, which is equivalent to a Buy according to our proprietary rating system. The POWR ratings assess stocks based on 118 factors, each of which has its own weighting.
It is ranked 4th out of 21 stocks in the Auto Dealers & Rentals sector. It is rated A for Sentiment, and B for Stability and quality.
We also graded CPRT for Value, Growth, and Momentum. All CPRT ratings are available here.
Penske Automotive Group, Inc. (PAG)
PAG is a diversified transport services company that operates automobile and commercial truck dealerships both in the United States as well as internationally. The company is divided into four segments: Retail Automotive (automotive), Retail Commercial Truck (trucks), Other and Non-Automotive Investments.
PAG's trailing-12 month Return on Common Equity is 184.8% greater than the industry average of 11.79%. The 9.78% trailing-12 month Return on Total Assets of PAG is 151.2% more than the industry average. Its 2.02x asset turnover ratio trailing 12 months is 94.3% greater than the average industry of 1.04x.
PAG's revenues for the first quarter ending March 31, 2023 increased by 5.2% over the previous year to $7.34 Billion. The gross profit of the company increased by 1.7% over the past year to $1.25 Billion. The company's EPS was $4.31.
PAG's revenues for the quarter ending 30 June 2023 are expected to grow 1.3% over last year to $7.00 billion. The company has a history of surprising earnings, exceeding consensus estimates for EPS in the last four quarters. The stock closed the last trading day at $138.16, up 39.6% over the past year.
PAG's Power Ratings reflect the solidity of its prospects. Overall, it has a rating of B which is equivalent to a buy. It is ranked 8th in the same sector. It also has a B-grade for Value.
Click here to view the other PAG ratings for Growth, Momentum Stability Sentiment and Quality.
RUSHA is an integrated retailer in North America and the United States of Commercial Vehicles and Related Services. The company operates commercial vehicle dealerships in the United States and Canada under the name Rush Truck Centers.
RUSHA has a trailing-12 month Return on Common Equity of 23.21%, which is 63.8% more than the industry average of 14.17%. The 9.81% Return on Total Assets of RUSHA is 87.6% greater than the industry average. Its 2.04x asset turnover ratio trailing-12 months is 154.2% greater than the industry's average of 0.80x.
The total revenue of RUSHA for the first quarter ending March 31, 2023 increased by 22.3% from year-over-year, to $1.91 Billion. Gross profit increased by 15.4% over the past year to $398.77 millions. Its adjusted EBITDA grew 30.7% to $560.39 millions, and its net EPS attributable RUSHA was $1.60.
RUSHA is expected to grow its revenue by 11.8% over the past year to $2.00 billion for the quarter that ends June 30, 2023. The company has an impressive track record of earnings surprises, exceeding consensus estimates for EPS in all four previous quarters. In the last nine months, shares have gained 11.2% and closed the last session at $53.01.
The positive outlook of RUSHA is reflected by its POWR ratings. The stock is rated B overall, which in our rating system translates into a Buy.
It is ranked second in the Auto Dealers & Rentals Industry. It also has a B-grade for Value and Sentiment.
We rate RUSHA in total on eight different levels. In addition to the above grades, we also gave RUSHA grades in terms of Growth, Momentum and Stability. Click here to view all ratings.
Death trap stocks lurk in your portfolio
CPRT shares remained unchanged in Friday's premarket trading. CPRT shares have gained 27.71% year-to-date compared to an 8.03% increase in the benchmark S&P 500 Index during the same time period.
Malaika Alphonsus is the author
Malaika's love of writing and her interest in the financial markets inspired her to pursue a job in investment research. She has a degree from the University of California, Berkeley in Economics and Psychology. Her goal is to help investors make informed decisions about their investments.