Lithia Motors: Strong Growth Catalysts, But Not Enough Margin Of Safety (NYSE:LAD)

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Close up of a man receiving new car key.

skynesher

Thesis

Lithia & Driveway (NYSE:LAD) has been a machine over the last decade. It has consistently earned a 20% return on its equity. While continually being able to grow the equity it can employ in its business.

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Data by YCharts

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Data by YCharts

Lithia dealerships and gross profit per dealership

LAD’s SEC fillings/Author’s work

Lithia new car sales and gross profit per car sold

Company annual reports/Author’s work

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Data by YCharts

All in thousands except for units sold 2018 2019 2020 2021 TTM Future (My guess)
Used units per dealership 895 907 877 991 990 1000
New units per dealership 1092 960 819 938 868 1100
F&I gross profit per dealership $2,691 $2,759 $2,774 $3,782 $4,088 $4,000
Maintenance gross profit per dealership $3,554 $3,551 $3,430 $3,995 $4,493 $4,400
Gross profit per used unit $2.1 $2.2 $2.4 $3.0 $2.9 $2.4
Gross profit per new unit $2.1 $2.1 $2.7 $4.7 $6.0 $2.0
Gross profit per dealership $10,515 $10,393 $10,649 $15,320 $16,786 $13,000

Dealerships owned 311
Gross Profit $4,043,000
SG&A $2,627,950
Depreciation & Amortization $200,000
Operating Income $1,215,050
Interest expense $250,000
EBT $965,050
Income tax $260,564
Net income $704,487
Shares outstanding 27,338
EPS $25.77

60% 65% 70%
9,000 $17.88 $14.14 $10.41
10,000 $21.20 $17.05 $12.90
11,000 $24.52 $19.96 $15.39
12,000 $27.85 $22.86 $17.88
13,000 $31.17 $25.77 $20.37
14,000 $34.49 $28.68 $22.86
15,000 $37.81 $31.85 $25.35
16,000 $41.13 $34.49 $27.85

LAD gross profit per segment

LAD investor relations

LAD gross profit per segment during the GFC

Author’s work