America's love affair with the car continues. Sonic Automotive, Inc. (SAH) saw both new and used car sales up double digits in the third quarter. This Zacks #1 Rank (strong buy) is an attractive value stock with a forward P/E of 11.4.
Sonic Automotive is one of the largest auto retailers in the United States. It operates 100 dealerships in 15 states and offers 30 different car brands.
The company also provides car repair services.
Sonic Beat for the 5th Quarter in a Row
On Oct 25, Sonic reported its third quarter results and surprised on the Zacks Consensus by 6.5%. Earnings per share were 33 cents compared to the consensus of 31 cents. The company only made 25 cents in the year ago quarter.
Revenue jumped 13% as both new vehicle and used vehicle sales remained strong. New vehicle revenue rose 13% as volume jumped 8%. Used vehicle revenue climbed 17% as volume gained 16%.
It was the 10th consecutive quarter of double-digit growth.
The parts and services segment also saw sales rise 5%.
Raised Full Year Guidance
Given yet another strong quarter, Sonic raised its full year guidance to a range between $1.33 to $1.37 from the July guidance of $1.18 to $1.28.
The analysts also revised their estimates. The 2011 Zacks Consensus Estimate jumped to $1.35 from $1.28 in the last 2 months.
That is earnings growth of 36.2%.
Double digit earnings growth is expected to continue in 2012 as the Zacks Consensus Estimates climbed to $1.57 from $1.48 in the prior 60 days. That is further earnings growth of 16.5%.
Strong Value Credentials
Like most other companies, Sonic's shares sold off last summer but have since rebounded.
In addition to a P/E under 15, which is what I use as a cut-off for value stocks, Sonic also has other value characteristics.
It has a price-to-book ratio of 1.6. A P/B ratio under 3.0 usually indicates value.
The company also has a low price-to-sales ratio of just 0.1. A P/S ratio under 1.0 can indicate a company is undervalued. Sonic's P/S ratio is well below that cut-off level.
Additionally, investors are rewarded with a dividend currently yielding 0.6%.
If you're looking for a play on the rebound in auto sales, Sonic has both double digit earnings growth and value.
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