The automotive industry is expanding with rapid investments in new technologies, such as connected cars, electric cars, and self-driving cars. Although macroeconomic headwinds persist, fundamentally strong stocks Copart, Inc. (CPRT), Penske Automotive Group, Inc. (PAG), and Rush Enterprises, Inc. (RUSHA) could be profitable buys.
The increasing number of automotive dealers and a consumer preference for seamless purchase is boosting the online automotive buying market.
The global online car-buying market is expected to reach $722 billion by 2030, growing at a CAGR of 12.2%.
In recent times, online car buying has gained popularity, with end-to-end purchasing available through online retail stores. Online car buying platforms offer customers numerous benefits, such as increased transparency in pricing, the convenience of shopping from home, and a digital payment process.
Additionally, the global automotive market is expected to reach $28.7 billion by 2030, at a CAGR of 4.5%, driven by rising demand for personal and commercial vehicles and technological advancement.
Given these factors, investors could look to buy fundamentally strong auto dealer stocks CPRT, PAG, and RUSHA.
Copart, Inc. (CPRT)
CPRT provides online auctions and vehicle remarketing services worldwide. It offers a range of services for processing and selling vehicles over the internet through its virtual bidding third-generation internet auction-style sales technology.
In terms of the trailing-12-month EBIT margin, CPRT's 37.42% is 288.9% higher than the 9.62% industry average. Its 11.92% trailing-12-month Capex/Sales is 312.4% higher than the 2.89% industry average. Likewise, its 29.45% trailing-12-month net income margin is 343.6% higher than the industry average of 6.64%.
CPRT’s total service revenues and vehicle sales for the second quarter ended January 31, 2023, increased 10.3% year-over-year to $956.72 million. The company’s non-GAAP net income increased 10.4% year-over-year to $293.56 million. Additionally, its non-GAAP net EPS came in at $0.61, representing a 10.9% increase from the prior-year period.
CPRT’s EPS and revenue for the quarter that ended April 30, 2023, are expected to increase 8.9% and 6.8% year-over-year to $0.64 and $1.00 billion, respectively. It has a commendable earnings surprise history, surpassing its consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 37.7% to close the last trading session at $77.76.
CPRT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Auto Dealers & Rentals industry, it is ranked #4 out of 21 stocks. It has an A grade for Sentiment and a B for Stability and Quality.
We have also given CPRT grades for Growth, Value, and Momentum. Get all CPRT ratings here.
Penske Automotive Group, Inc. (PAG)
PAG, a diversified transportation services company, operates automotive and commercial truck dealerships in the United States and internationally. The company operates through four segments: Retail Automotive, Retail Commercial Truck, Other, and Non-Automotive Investments.
In terms of the trailing-12-month Return on Common Equity, PAG's 33.58% is 184.8% higher than the 11.79% industry average. Its 9.78% trailing-12-month Return on Total Assets is 151.2% higher than the 3.89% industry average. Likewise, its 2.02x trailing-12-month asset turnover ratio is 94.3% higher than the industry average of 1.04x.
PAG’s revenue for the first quarter ended March 31, 2023, increased 5.2% year-over-year to $7.34 billion. The company’s gross profit increased 1.7% year-over-year to $1.25 billion. Moreover, its EPS came in at $4.31.
PAG’s revenue for the quarter ending June 30, 2023, is expected to increase 1.3% year-over-year to $7.00 billion. It has an impressive earnings surprise history, surpassing its consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 39.6% to close the last trading session at $138.16.
PAG’s POWR Ratings reflect its solid prospects. It has an overall rating of B, which equates to a Buy. It is ranked #8 in the same industry. In addition, it has a B grade for Value.
Click here to see the other ratings of PAG for Growth, Momentum, Stability, Sentiment, and Quality.
Rush Enterprises, Inc. (RUSHA)
RUSHA operates as an integrated retailer of commercial vehicles and related services in the United States and Canada. The company operates a network of commercial vehicle dealerships under the Rush Truck Centers name.
In terms of the trailing-12-month Return on Common Equity, RUSHA's 23.21% is 63.8% higher than the 14.17% industry average. Its 9.81% trailing-12-month Return on Total Assets is 87.6% higher than the 5.23% industry average. Likewise, its 2.04x trailing-12-month asset turnover ratio is 154.2% higher than the industry average of 0.80x.
RUSHA’s total revenue for the first quarter that ended March 31, 2023, increased 22.3% year-year-over-year to $1.91 billion. Its gross profit increased 15.4% year-over-year to $398.77 million. Additionally, it’s adjusted EBITDA increased 30.7% year-over-year to $560.39 million, while its net EPS attributable to RUSHA came in at $1.60, representing no change from the prior-year quarter.
RUSHA’s revenue for the quarter ending June 30, 2023, is expected to increase 11.8% year-over-year to $2.00 billion, respectively. It has a creditable earnings surprise history, surpassing its consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 11.2% to close the last trading session at $53.01.
RUSHA’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #2 in the Auto Dealers & Rentals industry. In addition, it has a B grade for Value and Sentiment.
In total, we rate RUSHA on eight different levels. Beyond what we stated above, we have also given RUSHA grades for Growth, Momentum, Stability, and Quality. Click here to access all the ratings.
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CPRT shares were unchanged in premarket trading Friday. Year-to-date, CPRT has gained 27.71%, versus a 8.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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