Sonic Automotive Inc (NYSE:SAH): Did It Outperform The Industry?
After reading Sonic Automotive Inc’s (NYSE:SAH) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Sonic Automotive
How Well Did SAH Perform?
I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to analyze many different companies on a similar basis, using new information. For Sonic Automotive, its latest trailing-twelve-month earnings is US$94.07M, which, against last year’s level, has declined by -0.42%. Since these values are somewhat myopic, I have computed an annualized five-year figure for SAH’s earnings, which stands at US$89.18M This suggests that, generally, Sonic Automotive has been able to increase its earnings over the past few years.
What’s the driver of this growth? Well, let’s take a look at if it is only because of industry tailwinds, or if Sonic Automotive has experienced some company-specific growth. In the last few years, Sonic Automotive top-line expansion has outstripped earnings and the growth rate of expenses. Though this resulted in a margin contraction, it has cushioned Sonic Automotive’s earnings contraction. Looking at growth from a sector-level, the US specialty retail industry has been growing, albeit, at a unexciting single-digit rate of 8.22% over the past twelve months, and 6.68% over the last five years. This suggests that whatever tailwind the industry is benefiting from, Sonic Automotive has not been able to gain as much as its industry peers.
What does this mean?
Sonic Automotive’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. You should continue to research Sonic Automotive to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for SAH’s future growth? Take a look at our free research report of analyst consensus for SAH’s outlook.
2. Financial Health: Is SAH’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.
