Morningstar Rating

Stock Research and Analysis

by David Whiston, CFA, CPA, CFE

Bulls Say

The DCH deal gives Lithia a large presence in New York and Southern California and brings over 1,400 new acquisition targets.
Manufacturers grant a limited number of franchise rights in a given geography, providing dealers with some protection against would-be competitors.
Lithia's rural niche makes it the Wal-Mart of auto dealers. Read more 

Bears Say

Lithia could need additional capital to fund expansion. In addition, Lithia will face increased competition for acquisitions now that it will operate in large cities and with Berkshire Hathaway seeking auto dealer acquisitions.
We think Detroit brands are unlikely to gain back all the share they lost over the past few decades.
If gas prices ever get severely high, Lithia could suffer because its rural customers favor pickups and SUVs. Read more 

Management

Lithia's return on invested capital has exceeded its cost of capital the past three years, and we expect respectable economic profits over our forecast period. We also like that the company resumed its dividend, and we want to keep seeing share repurchases   Read more 

Profile

Lithia Motors is a retailer of new and used vehicles and related services. The company offers 30 brands of vehicles at 129 stores throughout the western United States and   Read more 

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