Trade of the Day: AutoNation (AN)

AutoNation, Inc. (AN) may be a short-term winner, even if the market continues to flatten out or decline this quarter.
On the surface, the company presents itself as an auto retailer for new and used cars with primary markets in Florida, California and Texas. Geographic concentration is a risk now that the oil sector has slowed down; however, we think there is an underappreciated opportunity in the short-term precisely because of those risks.
It is true that most of AutoNation’s revenue is from car sales, with 57% of revenue coming from new-car sales and another 23% from used-car sales. But the earnings picture is where it gets more interesting. Just over 40% of AN’s earnings are from “Parts and Service.” That slice of the pie comes from a mere 15% of their total revenue. (more)

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