Morningstar Rating

Stock Research and Analysis

by David Whiston, CFA, CPA, CFE

Bulls Say

The firm's product mix, weighted toward luxury and import brands, brings more affluent consumers to the dealership, which partially mitigates the sales decline during cyclical downturns that auto sales typically experience.
Auto dealerships are moaty businesses that can maintain a narrow range of operating margins regardless of economic conditions.
Sizable dealership companies enjoy economies of scale, albeit limited ones. Read more 

Bears Say

Customers could delay maintenance or choose a cheaper independent repair shop instead of going to the dealer for servicing an older vehicle, which would negate the technological advantage that Asbury enjoys over smaller repair shops.
Overpaying for acquisitions is a risk and can lead to value destruction for investors.
Asbury's profits may never be as high as they used to be because the U.S. auto sales mix is gradually shifting to smaller fuel-efficient cars instead of high-margin light trucks. Read more 

Management

Asbury's return on invested capital has comfortably exceeded its cost of capital. The company's dividend yield had been one of the highest in the auto dealer universe, but the dividend was suspended in October 2008 because of the slowdown in earnings   Read more 

Profile

Asbury Automotive Group is a nationwide collection of automobile dealerships that went public in March 2002. The company operates 77 stores with associated parts and service   Read more 

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