August 4, 2022, Asbury Automotive Group, Inc. (NYSE:ABG) and AutoNation, Inc. (NYSE:AN)
Following blowout earnings, these auto retailers offer outstanding fundamentals, consistency, and upside as the best stocks to buy now.
With stocks showing some signs of life after kicking off August with back-to-back down days, the time is now to consider automotive retailers Asbury Automotive Group, Inc. (NYSE:ABG) and AutoNation, Inc. (NYSE:AN). Following the blowout earnings that each Company recently reported, they are looking like the best stocks to buy now.
Asbury Automotive, as of December 31, 2021, owned and operated 205 new vehicle franchises representing 31 brands of automobiles at 155 dealership locations along with 35 collision centers in the United States. It is one of the best stocks to buy now because of its attractive valuation, outstanding growth projections, and impressive recent earnings. Although analyst activity on this stock has been relatively quiet, don’t let that deter you. It has everything you want to see in a stock right now.
AutoNation, Inc. is another of the best stocks to buy now for similar reasons. The domestic, import, and premium luxury auto retailer just reported record-high quarterly profits and, as MarketBeat said, appears to be “firing on all pistons.” With management aggressively buying back shares, outstanding value, fundamentals, and analyst upside in its own right, this stock could have a great rest of the year.
You can’t go wrong with either of these stocks in this current market environment. Both offer unique potential and positive attributes as the best stocks to buy now.
Asbury Automotive Group, Inc. (NYSE:ABG)
Undervalued with a 14.08% upside, this auto retailer crushed its latest earnings and may just be getting started.
Asbury Automotive Group offers a range of automotive products and services, including new and used vehicles, vehicle repair and maintenance services, replacement parts, collision repair services, and finance and insurance products. While we briefly touched on Asbury Automotive Group’s footprint throughout the U.S., there is much more context as to why it’s one of the best stocks to buy now.
Jaw-Dropping Earnings and Revenue Growth That Could Continue to Soar
Asbury Automotive Group last announced its quarterly earnings on April 28, 2022, and the figures were mind-blowing.
First and foremost, EPS came in at $9.27 EPS. This figure not only beat analyst forecasts by $0.35. It marked a 108.78% year-over-year increase from Q1 2021’s EPS.
Moreover, ASB saw $3.91 billion in revenue, which marked a 78.4% year-over-year increase.
With revenue expected to see an 8.5% 5-year CAGR and net income projected to grow by 49.7%, the chance for Asbury to continue reporting impressive financial figures is highly likely.
That should be enough reason this Company is one of the best stocks to buy now.
Strong Margins and Deep Value Point to a Buying Opportunity
Although ABG is a long-term outperformer, as seen in this 5-year chart, the stock remains -22.67% below its all-time highs and deeply undervalued.
Outside the stock’s current trading level, its valuation additionally implies a robust free cash flow yield of 25.2%.
Plus, with the following multiples, the case for ABG being one of the best stocks to buy now at a deep discount becomes even more potent.
- 3x trailing P/E
- 3x forward P/E
- 10 PEG
- 6x price-to-book
- 3x trailing price-to-sales
- 3x forward price-to-sales
Outstanding fundamental margins depicting profitability, operational efficiency, and more further bolster its case as one of the best stocks to buy now.
Double-Digit Analyst Upside That Could Quietly Heat Up
There has not been a rush of analyst activity for Asbury lately. However, JPMorgan Chase & Co. just boosted its price target on August 1, 2022, from $195.00 to $205.00. Based on a consensus 12-month $203.75 price target according to MarketBeat, the stock could have a 14.08% upside from August 3, 2022’s $178.60 closing price.
ABG’s year-to-date low and high are $146.43 and $201.76, respectively.
AutoNation, Inc. (NYSE:AN)
After reporting a record-high quarterly profit, this multifaceted auto retailer could move 31.3%.
AutoNation is one of the best stocks to buy now because simply put, it’s “firing on all pistons.” With every angle of the automotive retail industry covered, AutoNation perfectly positioned itself to hedge against global chip shortages, inflation, and supply chain headwinds. By that, we mean it not only has 339 new vehicle franchises from 247 stores located primarily in the Sunbelt. It also owns and operates 57 AutoNation-branded collision centers, 9 AutoNation USA used-vehicle stores, 4 AutoNation-branded automotive auction operations, and 3 parts distribution centers.
For this reason, AutoNation shattered a quarterly profit record and is well on the way to further growth potential as one of the best stocks to buy now.
A Record-Setting Earnings Report Only Scratches the Surface of AutoNation’s Potential
AutoNation posted its earnings about two weeks ago, on July 21, 2022, and set quarterly records.
Ignore that revenues marginally fell year-over-year (-1.6%) and just missed analyst estimates. EPS came in at $6.48 earnings, beat the consensus estimate of $5.96 by $0.52, and increased 132.26% year-over-year.
Most importantly, quarterly profits hit all-time highs and increased 34%.
In addition, other outstanding year-over-year growth figures included:
- Used vehicle revenues up 13%
- Customer financial services gross profit up 16%
- Gross profits on new car sales up 47%.
Additionally, growth catalysts like a $1 billion stock buyback and acquisition of auto finance company CIG Financial have the Company staring at a colossal upside in the coming quarters.
So get in now while it’s still cheap.
Profitable and Deeply Undervalued
Profitability and a reasonably cheap valuation separate AutoNation from competitors like Carvana or CarMax.
First is the valuation. AutoNation currently trades -10.04% below its all-time highs, with a valuation that implies an outstanding free cash flow yield of 20.2%.
With the following multiples, AutoNation looks even more attractive as one of the best stocks to buy now- especially after the record profits it just reported.
Helping its case as one of the best stocks to buy now, especially at this discount, is a 7 out of 9 Piotroski Score. This indicates that AutoNation has healthy Liquid Balance Sheets, Profitability, and Operating Efficiency.
Margins such as its 16.8% ROA, 23.7% unlevered ROA, 57.4% ROCE, and 19.8% gross margin certainly explain why.
A STRONG BUY With a 31.3% Upside
According to TipRanks, AN is a STRONG BUY. That’s because 5 out of 6 Wall Street analysts who offered 12-month price targets for AN in the last 3 months rated it a BUY. The stock currently has a high price target of $213.00, a low of $104.00, and an average of $157.67. The average price target represents a 31.3% upside from August 3, 2022’s closing price of $120.08.
Consider this too. Four analysts upgraded their AN coverage between July 22-25, 2022.
- Seaport Res Ptn- Upgraded from NEUTRAL to BUY
- Stephens- Boosted price target to $130.00
- Wells Fargo & Company- Boosted price target to $159.00
- Guggenheim- Kept a BUY rating and boosted its price target from $205.00 to $213.00- a Wall Street high
AN’s year-to-date low and high are $96.56 and $126.39, respectively.