Lithia Motors (NYSE: LAD) and Group 1 Automotive (NYSE:GPI) are both retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their profitabiliy, valuation, risk, earnings, dividends, analyst recommendations and institutional ownership.

Institutional and Insider Ownership

99.1% of Lithia Motors shares are held by institutional investors. Comparatively, 94.5% of Group 1 Automotive shares are held by institutional investors. 7.9% of Lithia Motors shares are held by company insiders. Comparatively, 7.0% of Group 1 Automotive shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Lithia Motors and Group 1 Automotive’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Lithia Motors $9.27 billion 0.27 $425.85 million $8.30 12.03
Group 1 Automotive $10.69 billion 0.11 $407.19 million $6.51 8.79

Lithia Motors has higher revenue, but lower earnings than Group 1 Automotive. Group 1 Automotive is trading at a lower price-to-earnings ratio than Lithia Motors, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and target prices for Lithia Motors and Group 1 Automotive, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lithia Motors 1 2 5 0 2.50
Group 1 Automotive 1 4 0 0 1.80

Lithia Motors currently has a consensus target price of $110.20, indicating a potential upside of 10.40%. Group 1 Automotive has a consensus target price of $65.67, indicating a potential upside of 14.74%. Given Group 1 Automotive’s higher probable upside, analysts clearly believe Group 1 Automotive is more favorable than Lithia Motors.

Profitability

This table compares Lithia Motors and Group 1 Automotive’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lithia Motors 2.26% 22.13% 5.38%
Group 1 Automotive 1.46% 15.60% 3.44%

Dividends

Lithia Motors pays an annual dividend of $1.08 per share and has a dividend yield of 1.1%. Group 1 Automotive pays an annual dividend of $0.96 per share and has a dividend yield of 1.7%. Lithia Motors pays out 13.0% of its earnings in the form of a dividend. Group 1 Automotive pays out 14.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lithia Motors has raised its dividend for 6 consecutive years and Group 1 Automotive has raised its dividend for 7 consecutive years. Group 1 Automotive is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Lithia Motors has a beta of 1.73, suggesting that its share price is 73% more volatile than the S&P 500. Comparatively, Group 1 Automotive has a beta of 1.62, suggesting that its share price is 62% more volatile than the S&P 500.

Summary

Lithia Motors beats Group 1 Automotive on 13 of the 17 factors compared between the two stocks.

About Lithia Motors

Lithia Motors, Inc. is an operator of automotive franchises and a retailer of new and used vehicles and related services. As of February 28, 2017, it offered 30 brands of new vehicles and all brands of used vehicles in 154 stores in the United States and online at Lithia.com, DCHauto.com and CarboneCars.com. It operates through three segments: Domestic, Import and Luxury. Its Domestic segment consists of retail automotive franchises that sell new vehicles manufactured by Chrysler, General Motors and Ford. Its Import segment consists of retail automotive franchises that sell new vehicles manufactured primarily by Honda, Toyota, Subaru, Nissan and Volkswagen. Its Luxury segment consists of retail automotive franchises that sell new vehicles manufactured primarily by BMW, Mercedes-Benz and Lexus. The franchises in each segment also sell used vehicles, parts and automotive services, and automotive finance and insurance products.

About Group 1 Automotive

Group 1 Automotive, Inc. is an operator in the automotive retail industry. The Company, through its dealerships, sells new and used cars and light trucks; arranges related vehicle financing; sells service and insurance contracts; provides automotive maintenance and repair services, and sells vehicle parts. The Company operates through three segments: the U.S., which includes the activities of its corporate office, the United Kingdom and Brazil. The Company owned and operated 224 franchises, representing 32 brands of automobiles, at 171 dealership locations and 47 collision centers.

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