The auto industry is propelled by increased travel demand, rising tourism, convenience-seeking consumers, and a shift toward shared mobility solutions. So, I think investors could consider grabbing top auto stocks Copart Inc. (CPRT), Sonic Automotive, Inc. (SAH), and Rush Enterprises, Inc. (RUSHA) in November.
The auto dealer and rentals industry is a dynamic realm of automotive trends and innovation, encompassing a wide range of vehicles, services, and cutting-edge technology. Leading brands continuously invest in advancement, making this industry synonymous with performance, comfort, and modern transportation excellence.
Moreover, as cities grow, so does the need for vehicle rentals to transport goods. The rise in demand, especially for logistics and construction, is also boosting the truck rental market’s earnings.
The United States is set to dominate the global market, generating $29.940 million in revenue this year. Revenue is projected to expand at a CAGR of 1.5% to reach $31.80 billion by 2027. The user base is expected to reach 50.99 million by 2027, with a user penetration of 14.7%.
By 2027, online sales are expected to make up 83% of total revenue. Post-pandemic, car rental companies are seeing a rise in online interactions. Customers are using convenient websites and apps to book rental cars, while companies expand their reach through online travel agencies and third-party platforms.
Globally, the Car Rentals market projects a revenue of $99.27 billion in 2023. Revenue is expected to expand at a CAGR of 2.99% to reach $111.70 billion by 2027. By 2027, online sales are set to make up 72% of total revenue, marking a significant shift towards digital commerce.
Considering these conducive trends, let’s look at the fundamentals of the three best Auto Dealers & Rentals stocks, starting with number 3.
Stock #3: Copart Inc. (CPRT)
CPRT is a global leader in online vehicle auctions and vehicle remarketing services. The company assists vehicle sellers, including insurance companies and banks, in selling vehicles through online auctions. Its services include vehicle inspection, transportation, and title processing. It also operates platforms like CashForCars for buying salvaged vehicle parts and Copart 360 for detailed vehicle images. The company’s clients include licensed dismantlers, dealers, and the general public.
CPRT’s trailing-12-month gross profit margin of 45.73% is 50.9% higher than the industry average of 30.31%. Its 38.42% trailing-12-month EBIT margin is 301.3% higher than the 9.57% industry average.
On October 10, 2023, CPRT announced a strategic investment and partnership with Purple Wave, Inc., an online offsite heavy equipment auction company. The partnership aims to combine their expertise to benefit both marketplaces and shares a commitment to long-term value and innovation.
On September 12, CPRT and Hi Marley partnered to develop products that streamline automotive total loss claims. They aim to enhance efficiency and communication, leveraging AI and SMS interactions to expedite decision-making and improve the customer experience in the insurance claims process.
During the fourth quarter that ended July 31, 2023, CPRT’s total service revenues and vehicle sales and non-GAAP net income amounted to $997.59 million and $330.43 million, up 12.9% and 21.7% year-over-year. The company achieved gross profit of $457.58 million, up 19.9% year-over-year. For the year ended July 31, net cash provided by operating activities grew 15.9% year-over-year to $1.36 billion.
Street expects CPRT’s revenue and EPS to grow 10.7% and 27.4% year-over-year to $989.28 million and $0.32, respectively, for the first quarter ended October 2023. The company has surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
Shares of CPRT increased 63.3% over the past year and 53.1% year-to-date to close the last trading session at $46.62.
CPRT’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CPRT has a B grade for Stability, Sentiment and Quality. Within the B-rated Auto Dealers & Rentals industry, it is ranked #9 out of 20 stocks.
Click here for CPRT’s additional Growth, Value and Momentum ratings.
Stock #2: Sonic Automotive, Inc. (SAH)
SAH is an automotive retailer operating in three segments: Franchised Dealerships; EchoPark; and Powersports. The company sells new and used cars, provides maintenance and repair services, and offers financing and insurance options.
SAH’s trailing-12-month return on total capital of 8.27% is 34.4% higher than the industry average of 6.15%. Its 2.91x trailing-12-month asset turnover ratio is 191.8% higher than the 1.00x industry average.
On October 26, SAH declared a 3.4% increase to its quarterly cash dividend to $0.30 per share, payable on January 12, 2024. The company pays an annual dividend of $1.20, which translates to a yield of 2.38%, compared to a four-year average of 1.46%. The company has raised its dividend payouts at a CAGR of 41.8% over the past three years.
On the same day, the company announced that it had repurchased approximately 1.70 million Class A Common Stock shares for an aggregate purchase price of approximately $86.70 million during the third quarter, totaling approximately 3.30 million shares repurchased year-to-date.
For the third quarter ended September 30, 2023, the company reported total revenues of $3.64 billion, up 5.7% year-over-year. Its gross profit increased marginally year-over-year to $582.2 million. The company’s cost of sales declined 6.8% year-over-year to $3.06 billion. Moreover, it generated an adjusted EBITDA of $167.20 million.
Analysts expect SAH’s revenue and EPS to grow 1.7% and 9.8% year-over-year to $3.55 billion and $1.46 for the first quarter ending March 2024. The company has surpassed the revenue and EPS estimates in each of the trailing three quarters.
The stock has soared 5.2% over the past year and 2.2% year-to-date to close the last trading session at $50.36.
SAH’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
SAH has a B grade for Growth and Value. Within the same industry, it is ranked #8.
In addition to the POWR Ratings stated above, one can access SAH’s additional Momentum, Stability, Sentiment and Quality ratings here.
Stock #1: Rush Enterprises, Inc. (RUSHA)
RUSHA operates the largest network of commercial vehicle dealerships in North America. The company operates under the Rush Truck Centers name, selling and servicing commercial vehicles from various manufacturers. Its services include sales, parts, maintenance, repair, financing, and more, serving a wide range of clients across different states and provinces.
RUSHA’s trailing-12-month CAPEX/Sales of 4.14% is 36.2% higher than the industry average of 3.04%. Its 1.95x trailing-12-month asset turnover ratio is 146.7% higher than the 0.79x industry average.
On September 5, RUSHA supported Breast Cancer Awareness Month by selling limited-edition pink mudflaps at Rush Truck Centers locations in September and October. For each mudflap sold, the company donated $2 to the Breast Cancer Research Foundation to raise awareness and support breast cancer research. It has already raised over $15,000 for the foundation since 2022 by selling mudflaps and limited-edition graphic tees to employees and customers in the United States and Canada.
RUSHA pays $0.68 annually as dividends, which translates to a yield of 1.83% on the current market price. Its four-year average dividend yield is 1.35%. The company has raised its dividend payouts at a CAGR of 31.8% over the past three years.
In the third quarter ended September 30, 2023, the company achieved total revenue and gross profit of $1.98 billion and $394.41 million, up 6.2% and 3.4% year-over-year, respectively. For the 12 months ended September 30, its adjusted EBITDA grew 2.7% year-over-year to $541.87 million.
RUSHA’s revenue is expected to increase 9.5% year-over-year to $7.77 billion for the fiscal year ending December 2023. Its EPS is expected to amount to $4.05 in the same year. The company has surpassed the revenue and EPS estimates in each of the trailing four quarters.
The stock has soared 14.1% over the past year and 6.8% year-to-date to close the last trading session at $37.21.
RUSHA’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
RUSHA has a B grade for Value and Sentiment. Within the same industry, it is ranked #6.
To see RUSHA’s additional POWR Ratings for Growth, Momentum, Stability, and Quality, click here.
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CPRT shares were trading at $47.09 per share on Thursday morning, up $0.47 (+1.01%). Year-to-date, CPRT has gained 54.67%, versus a 15.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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