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Bear Of The Day: AutoNation (AN)

Brian Bolan

AutoNation (AN) is a Zacks Rank #5 (Strong Sell) and it fell to that Rank last week and that is a bad sign as the company is set to report earnings at the end of the week.  Let's review how this stock fell to the lowest Zacks Rank in this Bear of the Day article.

Description

AutoNation is the America's Largest Automotive Retailer, AutoNation is constantly innovating and striving to change the way America buys & services their vehicles. AutoNation offer a diversified range of automotive products and services, including new vehicles, used vehicles, parts and service, which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive finance and insurance products, which include vehicle service and other protection products, as well as the arranging of financing for vehicle purchases through third-party finance sources.

Earnings Estimates

The Zacks Rank is primarily driven by the movement in earnings estimates.  If estimates are moving up the Rank moves in a similar direction.  When estimates slide, the Rank tends to follow suit

For AN the estimates for the current quarter have been falling.  90 days ago, the Zacks Consensus Estimate was at $1.09, that fell to $0.94 as of 30 days ago and that has slipped to the current level of $0.92.

There is a similar story for the next quarter, as numbers fell from $1.10 to $1.05 to $1.03 over the same time period.

The full year estiamte carries more weight than the quarterly numbers on the Zacks Rank.  Those numbers are moving lower as well.  90 Days ago the 2019 estimate was at $4.56 and now it is down to $4.14.

Earnings History

AN does not have the worst earnings history I have ever seen, but it is not the best.  Of the last four reports, there have been two beats and two misses.  That isn't a big problem, as 3 of the 4 reports were a beat or a miss of a single penny.

That said, the last two reports were misses so there is a recent trend.

Valuation

As a growth investor, I look at the topline.  I see contraction of 4.78% on an annual basis, so I am not thrilled.  Then I see the price to sales of 0.16x and I see the market does not really value their sales.  

A 9x forward earnings multiple is low, but so is the price to book multiple of 1.26x.

The valuation is low, but depressed earnings tell you that we could see a lower valuation still.  

Chart

AutoNation, Inc. Price and Consensus

AutoNation, Inc. Price and Consensus | AutoNation, Inc. Quote

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