What Makes Group 1 Automotive (GPI) an Attractive Pick?
Group 1 Automotive, Inc. GPI has a diversified product mix, multiple income streams and resilient demand for vehicles that position it well for top-line growth. Acquisitions of dealerships and franchises are also likely to boost the firm’s prospects.
Let us discuss the factors that highlight why GPI is an attractive pick.
Growth Indicators
Group 1's diversified product mix and multiple streams of income reduce its risk profile. The company generates income from businesses including used and new vehicle retail, finance, insurance and automotive repair and maintenance.
A diversified portfolio positions it well for top- and bottom-line growth. Resilience in consumer demand for vehicles continues in the U.S. and the U.K.
As of Mar 31, 2023, the new vehicle order bank in the U.K. was nearly 17,600 units, representing more than a six-month backlog based on the company’s current pace. Group 1 is also riding on the strength of its after-sales business. The firm anticipates trends to remain robust for the rest of 2023.
The firm’s omnichannel efforts to boost sales bode well. Its digital efforts focused on the online customer scheduling and appointment system are enhancing its customers’ experiences. The AcceleRide platform, its online retailing initiative, active at most of the firm’s U.S. dealerships, allows the company to enjoy higher productivity. Units sold through AcceleRide rose 117% year over year in the last reported quarter.
Group 1’s acquisitions of dealerships and franchises to expand and optimize its portfolio are likely to boost the firm’s prospects. In May 2023, the company acquired three Beck & Masten Buick-GMC dealerships, which has expanded the company’s footprint and is set to buoy top-line growth.
In June, it acquired Beck & Masten Kia and expanded its footprint to 15 brands and 18 dealerships in the Houston market. With these acquisitions, Group 1's year-to-date total acquired revenues amounted to $1 billion.
The company’s investor-friendly moves instill optimism. In February, GPI hiked its 2023 annual dividend rate by 20%. During the last reported quarter, the company bought back $35 million in shares. Its return on equity (ROE) of 31% compares favorably with the auto sector’s 11.6%, underscoring management's efficiency in rewarding shareholders.
Favorable Style Score
GPI carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score in combination with a solid Zacks Rank are the best investment bets.
Robust Prospects
The Zacks Consensus Estimate for Group 1’s 2023 revenues is $16.70 billion, implying a rise of 3% from the year-ago reported number.
Impressive Earnings Surprise History
Group 1’s bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 9.71%.
Zacks Rank & Key Picks
GPI currently carries a Zacks Rank #2 (Buy).
Some other top-ranked players in the auto space are Ford Motor Company F and BYD Company Limited BYDDY, each sporting a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Ford is one of the world’s leading automakers. F shares are up 31% year to date.
Ford has a VGM Score of B. The company surpassed earnings estimates in two out of the trailing four quarters and missed twice, the average surprise being 24.35%.
BYD is engaged in the research, development, manufacture and distribution of automobiles, secondary rechargeable batteries and mobile phone components. BYDDY shares are up 37.5% year to date.
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Ford Motor Company (F) : Free Stock Analysis Report
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