Should You Investigate AutoNation, Inc. (NYSE:AN) At US$33.74?
AutoNation, Inc. (NYSE:AN), which is in the specialty retail business, and is based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $44.9 at one point, and dropping to the lows of $33.37. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether AutoNation’s current trading price of $33.74 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AutoNation’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for AutoNation
What’s the opportunity in AutoNation?
According to my valuation model, the stock is currently overvalued by about 43.88%, trading at US$33.74 compared to my intrinsic value of $23.45. This means that the opportunity to buy AutoNation at a good price has disappeared! But, is there another opportunity to buy low in the future? Since AutoNation’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of AutoNation look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Though in the case of AutoNation, it is expected to deliver a negative earnings growth of -8.0%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? If you believe AN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on AN for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on AutoNation. You can find everything you need to know about AutoNation in the latest infographic research report. If you are no longer interested in AutoNation, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
