Asbury Automotive Group Inc (ABG, Financial) has recently experienced a daily loss of -7.97%, contributing to a 3-month decline of -6.34%. Despite these fluctuations, the company boasts a robust Earnings Per Share (EPS) of 41.85. This leads to an important question for investors: Is Asbury Automotive Group modestly undervalued? To uncover the answer, we delve into a comprehensive valuation analysis that will shed light on the stock's intrinsic worth.
Company Overview
Asbury Automotive Group Inc (ABG, Financial) is a formidable presence in the automobile dealership industry, going public in March 2002. With a sprawling network of 138 new-vehicle stores, seven used-vehicle stores, and 32 collision centers, the company has a strong foothold in the luxury and import brand segments, accounting for over 70% of new-vehicle revenue. Asbury Automotive Group's strategic operations span across 14 states, with prominent store brands like David McDavid and Park Place in Texas, and the Larry H. Miller brand in the Western U.S. The company's ambitious growth plans include the acquisition of Koons in the Washington, D.C. area, targeting an impressive $32 billion revenue by 2025. Currently, the stock's price stands at $204.99, with a market cap of $4.20 billion, juxtaposed against a GF Value of $234.98, suggesting a potential undervaluation.
Understanding GF Value
The GF Value is a proprietary metric that determines the intrinsic value of a stock, incorporating historical trading multiples, an adjustment factor based on past performance, and future business projections. This value serves as a benchmark for fair trading. When the stock price significantly deviates from the GF Value Line—above suggests overvaluation and below indicates undervaluation. Asbury Automotive Group, with its current price of $204.99 per share and a market cap of $4.20 billion, appears modestly undervalued according to this measure.
Given its relative undervaluation, Asbury Automotive Group's stock may offer a higher long-term return than its business growth alone would suggest. This presents an attractive opportunity for investors seeking value.
Financial Strength
Investors must scrutinize a company's financial strength to avoid potential capital loss. Asbury Automotive Group's cash-to-debt ratio of 0.01 places it lower than 98.31% of its industry peers. Despite this, the company's financial strength is rated a fair 6 out of 10 by GuruFocus.
Profitability and Growth
Asbury Automotive Group's consistent profitability over the past decade underscores its reduced risk profile. With an operating margin of 7.7%, the company outperforms 67.37% of its industry counterparts. Asbury Automotive Group's revenue growth rate of 22.6% and a 3-year average EBITDA growth of 53% further bolster its position, outpacing a majority of the Vehicles & Parts industry players.
ROIC vs WACC
Comparing the Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) offers insights into a company's profitability relative to its capital costs. Asbury Automotive Group's ROIC of 11.73 surpasses its WACC of 6.17, indicating efficient capital utilization.
Conclusion
Asbury Automotive Group (ABG, Financial) is positioned as modestly undervalued. The company's financial condition is fair, and its profitability is robust. With growth outperforming 91.73% of the industry, Asbury Automotive Group is a compelling consideration for investors. For a deeper dive into the company's financials, one can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
