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AutoNation Inc AN

Morningstar Rating
$149.80 +5.38 (3.73%)
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Company Report

AutoNation Earnings: Profit Normalization Journey Continues

AutoNation finished 2023 with a good fourth quarter that, like its peers, continued to show profits coming down from record levels induced by the chip shortage inflating new vehicle profitability. We maintain our fair value estimate but will reassess all modeling inputs after we roll our model for the 10-K. A fair value estimate increase is possible as we will model 2024 share repurchases given the company’s history of ample buybacks. Full-year buybacks totaled $863.6 million, while fourth-quarter spending was $151.2 million at about $137.45 per share. In 2023, the company bought back 13% of its stock, and since year-end 2020 it has repurchased over 50%, so 2024 buybacks are almost certain, in our view. As of Feb. 9, about $320 million of authorization remains. Regarding acquisitions, management said that sellers' asking prices are based more on 2022 profit levels as sellers focus on trailing 12-month levels, so we expect more buybacks while management waits for sellers to reset expectations lower. Year-end liquidity was $1.5 billion, nearly all from the credit line, and the firm has room within its debt covenants to increase leverage should it need to for an acquisition.

Price vs Fair Value

AN is trading at a 8% discount.
Price
$149.80
Fair Value
$721.00
Uncertainty
High
1-Star Price
$727.80
5-Star Price
$16.30
Economic Moat
Tfrqswy
Capital Allocation
Ctygtnrt

Bulls Say, Bears Say

Bulls

AutoNation's massive size provides some appealing economies of scale, illustrated by strong operating margins.

Bears

About half of revenue is derived from new-car sales, leaving AutoNation vulnerable to the fluctuations of a viciously cyclical industry. This risk is greater for AutoNation as it gets a much larger share of its sales from California and Florida than the national average. These markets could be hit worse than other U.S. markets in a housing downturn.

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News

Trading Information

Previous Close Price
$144.42
Day Range
$145.68149.96
52-Week Range
$120.26182.08
Bid/Ask
$141.00 / $150.00
Market Cap
$6.24 Bil
Volume/Avg
2 / 436,577

Key Statistics

Price/Earnings (Normalized)
6.54
Price/Sales
0.25
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
14.01%

Company Profile

AutoNation is the second largest automotive dealer in the United States, with 2022 revenue of $27 billion and over 250 dealerships, plus 53 collision centers. The firm also has 16 AutoNation USA used-vehicle stores, a captive lender, four auction sites, and three parts distributors all across 20 states primarily in Sunbelt metropolitan areas. New-vehicle sales account for nearly half of revenue; the company also sells used vehicles, parts, and repair services as well as auto financing. The company (formerly Republic Industries) spun off its waste management unit (Republic Services) in 1999 and its car rental businesses (ANC Rental) in 2000. Wayne Huizenga founded the company in the 1990s to bring the rollup acquisition strategy to auto retailing, which has proved to be a smart move.
Sector
Consumer Cyclical
Industry
Auto & Truck Dealerships
Stock Style Box
Small Value
Total Number of Employees
25,300

Competitors

Valuation

Metric
AN
PAG
GPI
Price/Earnings (Normalized)
6.549.546.12
Price/Book Value
2.822.181.38
Price/Sales
0.250.350.21
Price/Cash Flow
5.088.944.87
Price/Earnings
AN
PAG
GPI

Financial Strength

Metric
AN
PAG
GPI
Quick Ratio
0.200.210.27
Current Ratio
0.771.001.11
Interest Coverage
5.147.295.75
Quick Ratio
AN
PAG
GPI

Profitability

Metric
AN
PAG
GPI
Return on Assets (Normalized)
9.44%7.41%8.38%
Return on Equity (Normalized)
49.12%24.75%24.53%
Return on Invested Capital (Normalized)
13.86%10.86%12.13%
Return on Assets
AN
PAG
GPI
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