Sonic Automotive Inc (SAH) stock analysis

P/E below its 5-year median

Sonic Automotive's P/E of 10.2 is below its own 5-year median of 10.7.

P/E below the industry

Sonic Automotive's P/E of 10.2 is below the Retail-auto dealers & gasoline stations median of 12.5.

EV/EBITDA below its 5-year median

Sonic Automotive's EV/EBITDA of 5.7 is below its 5-year median of 6.5.

P/B below the industry

Sonic Automotive's price-to-book of 1.88 is below the Retail-auto dealers & gasoline stations median of 2.37.

Trading below fair value

The share price of $63.23 is below our fair value estimate of $85.27.

Margin of safety over 20%

The price is 25.8% below fair value, more than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 2.7% a year over the last three fiscal years, short of the 10% we look for.

EPS growing 10%+ a year

Diluted EPS grew 15.3% a year over the last three fiscal years.

Earnings acceleration

Needs positive net income now, a year ago and five years ago.

Growing faster than the industry

Revenue grew 2.0% over the last twelve months; the Retail-auto dealers & gasoline stations median is 1.5%.

Company guidance

No outlook found in earnings releases from the last twelve months.

Gross margin improving

Gross margin was 15.7% over the last twelve months, against 15.5% a year earlier.

Return on equity over 15%

Return on equity was 19.4% over the last twelve months and averaged 19.8% over five years.

Return on capital over 10%

Return on invested capital was 19.0%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Sonic Automotive's return on equity of 19.4% is above the Retail-auto dealers & gasoline stations median of 12.4%.

Earnings over 5 years

Needs positive net income five years ago and in the latest year.

Net margin below its 5-year average

Net margin was 1.3% over the last twelve months, against a 5-year average of 1.4%.

Net margin below the industry

Sonic Automotive's net margin of 1.3% is below the Retail-auto dealers & gasoline stations median of 2.6%.

High debt

Debt is 165% of shareholders' equity, above the 40% we consider low.

Debt rising against equity

Debt to equity rose from 88.4% five years ago to 165%.

Debt not well covered by cash flow

Operating cash flow over the last twelve months equals 3.0% of total debt; we look for at least 20%.

Interest coverage

Interest expense is not reported separately.

Short-term assets don't cover short-term debts

Current assets are 0.95 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 3.17; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Sonic Automotive paid dividends worth 2.5% of the share price over the last twelve months.

Yield below Treasuries

The 2.5% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Sonic Automotive yields 2.5%.

Dividend stability

Fewer than five years of dividend history.

Not covered by earnings

The company lost money, so earnings do not cover the dividend.

Not covered by free cash flow

Free cash flow was negative, so the dividend was paid from other sources.