Autonation Stock Fair Value Calculation – Is AutoNation’s Heavy Debt Burden Too Much to Bear?
December 16, 2023
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AUTONATION ($NYSE:AN): Investors have long been concerned about AutoNation’s debt burden, a topic that has frequently been brought up in the company’s quarterly earnings calls. AutoNation is the largest automotive retailer in the United States, and is publicly traded on the NYSE. To better understand the potential risks associated with AutoNation’s debt, it is important to look at the company’s total debt load in comparison to its total assets. This ratio is high compared to many other companies, which tells us that AutoNation has a high debt burden relative to its assets.
However, it is important to note that AutoNation’s debt burden is not so large that it has become unmanageable. The company is still generating positive cash flow, and its debt load is well within industry standards. Nevertheless, investors should be aware of the potential risks associated with AutoNation’s current debt load and be prepared to take action if necessary.
Share Price
On Tuesday, AutoNation’s stock opened at $135.6 and closed at $133.9, down by 1.7% from prior closing price of $136.3. Given the current economic uncertainty, it is difficult to predict how long AutoNation can sustain its debt levels and interest expenses. Moreover, the company’s stock performance over the past few months suggests that investors are wary of AutoNation’s financial health. As such, it is uncertain if AutoNation’s heavy debt burden is too much to bear or if the company can manage its financial obligations in the long run. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for Autonation. AutoNations_Heavy_Debt_Burden_Too_Much_to_Bear”>More…
| Total Revenues | Net Income | Net Margin |
| 26.88k | 1.09k | 4.1% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for Autonation. AutoNations_Heavy_Debt_Burden_Too_Much_to_Bear”>More…
| Operations | Investing | Financing |
| 987.4 | -729 | -623 |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for Autonation. AutoNations_Heavy_Debt_Burden_Too_Much_to_Bear”>More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 11.24k | 9.1k | 50.38 |
Key Ratios Snapshot
Some of the financial key ratios for Autonation are shown below. AutoNations_Heavy_Debt_Burden_Too_Much_to_Bear”>More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 10.1% | 25.9% | 6.5% |
| FCF Margin | ROE | ROA |
| 2.3% | 51.4% | 9.7% |
Analysis – Autonation Stock Fair Value Calculation
At GoodWhale, we have conducted an extensive analysis of AUTONATION‘s wellbeing. Our proprietary Valuation Line has calculated the fair value of AUTONATION’s share to be approximately $166.1. However, currently the stock is trading at $133.9 – a price that is undervalued by 19.4%. This presents an interesting opportunity for investors looking to capitalize on a discounted price. We thus encourage potential investors to conduct further research into AUTONATION, and to take advantage of this potentially lucrative opportunity. More…
Peers
AutoNation Inc is one of the largest automotive retailers in the United States. AutoNation’s competitors include Penske Automotive Group Inc, Lithia Motors Inc, and O’Reilly Automotive Inc.
– Penske Automotive Group Inc ($NYSE:PAG)
Penske Automotive Group is an American transportation company that operates automotive and commercial truck dealerships in the United States, Australia, and the United Kingdom. The company also rents and leases vehicles, and provides financing and insurance products. Penske Automotive Group is headquartered in Bloomfield Hills, Michigan. As of 2022, the company had a market cap of 8.01B and a return on equity of 29.56%.
– Lithia Motors Inc ($NYSE:LAD)
Lithia Motors Inc is an American automotive retailer. It is the third largest publicly traded vehicle retailer in the United States. As of 2022, it had a market cap of 5.69B and a ROE of 26.55%. The company sells new and used vehicles, and provides vehicle financing, parts, service, and insurance. It operates through a network of dealerships in the United States and Puerto Rico.
– O’Reilly Automotive Inc ($NASDAQ:ORLY)
O’Reilly Automotive Inc. is a publicly traded company with a market capitalization of $51.07 billion as of 2022. The company has a return on equity of -252.24%. O’Reilly Automotive Inc is a retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States.
Summary
Investing analysis of Autonation has been conducted to determine if the company is using too much debt. Financial metrics have been employed to evaluate the company’s debt-to-equity ratio, leverage ratio, and debt service coverage ratio. Results of the analysis show that Autonation’s debt-to-equity ratio and leverage ratio are lower than industry benchmarks, suggesting that the company is not taking on excessive levels of debt.
Additionally, the company’s debt service coverage ratio is above the industry average and indicates it is capable of meeting its financial obligations. In conclusion, Autonation appears to be managing its debt levels responsibly.
