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For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as 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.
Anyone can invest, but building a successful investment portfolio requires research, patience, and a little bit of risk. So, if you had invested in Lithia Motors ten years ago, you're likely feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in January 2012 would be worth $13,030.24, or a gain of 1,203.02%, as of January 19, 2022, and this return excludes dividends but includes price increases.
The S&P 500 rose 249.92% and the price of gold increased 5.07% over the same time frame in comparison.
Analysts are forecasting more upside for LAD too.
Lithia’s diversified product mix and multiple streams of income reduce its risk profile. Its ambitious target to generate $50 billion in revenues and $50 in earnings per share by 2025 instills optimism. Enhanced digital solutions — including the Driveway e-commerce program — are helping Lithia to further boost profitability and market presence. The company is on a buyout spree, which is increasing its market share, thereby positioning it for growth. Through the acquisitions made, the auto retailer has achieved around $7 billion in total annualized revenues in 2021. Lithia’s investor-friendly moves are driving shareholders’ confidence. The company increased payout in each of the last five years with an annualized dividend growth rate of 5.9%. Given the tailwinds, the stock warrants a bullish stance now.
The stock is up 8.37% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 2 higher, for fiscal 2021. The consensus estimate has moved up as well.
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Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
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