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How much a stock's price changes over time is important for most investors, since price performance can both impact your investment portfolio and help you compare investment results across sectors and industries.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you'd invested in Lithia Motors (LAD) ten years ago? It may not have been easy to hold on to LAD for all that time, but if you did, how much would your investment be worth today?
Lithia Motors' Business In-Depth
With that in mind, let's take a look at Lithia Motors' main business drivers.
Lithia Motors, Inc. is one of the leading automotive retailers of new and used vehicles, and related services in the United States. As of Dec 31, 2020, the company offered 33 vehicle brands across 209 stores in 22 states within the United States. The core brands offered by Lithia Motors include Chrysler, General Motors, Toyota, Subaru, Honda, Acura, Ford, BMW, MINI, Nissan and Hyundai.
Lithia Motors offers tailored service complemented through its nationwide network. Further, it has the largest online inventory with competitive pricing on vehicles and service. In July 2020, Lithia introduced Driveway, e-commerce platform, that allows the company to deliver differentiated, proprietary digital experiences.
Apart from a wide range of new and used vehicles, the company offers finance and insurance products, and automotive repair and maintenance. It focuses on diversification of products, services, brands and geographic locations to reduce dependence on one manufacturer along with reducing exposure to shifting consumer preferences.
Lithia Motors has three reportable segments as follows —
The Domestic segment has retail automotive franchises that sell new vehicles manufactured by Chrysler, General Motors and Ford.
The Import segment comprises retail automotive franchises that sell vehicles manufactured primarily by Honda, Toyota, Subaru, Nissan and Volkswagen.
The Luxury segment comprises retail automotive franchises that sell new vehicles manufactured primarily by BMW, Mercedes-Benz and Lexus.
Apart from new vehicles, all the above segments deal in used vehicles, parts and automotive services, and automotive finance and insurance products for the brands.
Lithia’s business mix consists of New Vehicles (accounted for about 51.6% of the company’s revenues in 2020), Used Vehicles (32.8%), Parts and service (10.3%), Fleet and Other (0.8%) and Finance and insurance (4.5%). As of December 31, 2020, Lithia had liquidity of $1.4 billion, which was comprised of $160.2 million in cash and $1.2 billion availability on our credit facilities.
During 2020, the company acquired thirty stores and divested five stores. It invested $1.2 billion, to acquire the stores and expects these acquisitions to add more than $3.5 billion in annual revenues.
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Lithia Motors, if you bought shares a decade ago, you're likely feeling really good about your investment today.
According to our calculations, a $1000 investment made in July 2011 would be worth $18,083.90, or a gain of 1,708.39%, as of July 29, 2021, and this return excludes dividends but includes price increases.
The S&P 500 rose 238.34% and the price of gold increased 6.95% over the same time frame in comparison.
Looking ahead, analysts are expecting more upside for LAD.
Lithia’s diversified product mix and multiple streams of income reduce its risk profile. Lithia’s five-year plan to generate $50 billion in revenues and $50 in earnings per share instills optimism. Enhanced digital solutions — including Driveway e-commerce program — are helping Lithia to further boost profitability and market presence. Lithia’s acquisition of dealerships helps to increase its market share and positions it for growth. Since the five-year plan’s roll-out in July 2020, the auto retailer has achieved around $8 billion in total annualized revenues. Lithia’s investor-friendly moves are driving shareholders’ confidence. The company increased its dividend in each of the last five years with an annualized dividend growth rate of 5.6%. Hence, the stock warrants a bullish stance now.
Over the past four weeks, shares have rallied 9.14%, and there have been 4 higher earnings estimate revisions in the past two months for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.
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Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
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