Morningstar Rating

Stock Research and Analysis

by David Whiston, CFA, CPA, CFE

Bulls Say

By managing inventory close to a 50/50 domestic/import mix, Lithia lessens its dependence on Detroit automakers and eases some concentration risk.
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, and its small size limits borrowing capacity relative to larger competitors. In addition, Lithia could face increased competition for acquisitions if it expands outside core markets or if competitors move into the Pacific Northwest.
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 greatly because its 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 healthy 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 28 brands of vehicles at 98 stores primarily throughout the western United   Read more 

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