Sonic Automotive (NYSE: SAH) and Group 1 Automotive (NYSE:GPI) are both small-cap retail/wholesale companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, dividends, institutional ownership and earnings.
Volatility and Risk
Sonic Automotive has a beta of 1.6, suggesting that its share price is 60% more volatile than the S&P 500. Comparatively, Group 1 Automotive has a beta of 1.75, suggesting that its share price is 75% more volatile than the S&P 500.
Sonic Automotive pays an annual dividend of $0.24 per share and has a dividend yield of 1.2%. Group 1 Automotive pays an annual dividend of $1.04 per share and has a dividend yield of 1.5%. Sonic Automotive pays out 13.0% of its earnings in the form of a dividend. Group 1 Automotive pays out 13.5% 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. Sonic Automotive has increased its dividend for 2 consecutive years and Group 1 Automotive has increased its dividend for 8 consecutive years. Group 1 Automotive is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This table compares Sonic Automotive and Group 1 Automotive’s net margins, return on equity and return on assets.
||Return on Equity
||Return on Assets
|Group 1 Automotive
Earnings & Valuation
This table compares Sonic Automotive and Group 1 Automotive’s gross revenue, earnings per share and valuation.
||Earnings Per Share
|Group 1 Automotive
Group 1 Automotive has higher revenue and earnings than Sonic Automotive. Group 1 Automotive is trading at a lower price-to-earnings ratio than Sonic Automotive, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
63.6% of Sonic Automotive shares are owned by institutional investors. 32.3% of Sonic Automotive shares are owned by insiders. Comparatively, 5.0% of Group 1 Automotive shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.
This is a breakdown of recent recommendations for Sonic Automotive and Group 1 Automotive, as provided by MarketBeat.
||Strong Buy Ratings
|Group 1 Automotive
Sonic Automotive currently has a consensus price target of $23.33, indicating a potential upside of 14.27%. Group 1 Automotive has a consensus price target of $81.86, indicating a potential upside of 19.17%. Given Group 1 Automotive’s higher probable upside, analysts plainly believe Group 1 Automotive is more favorable than Sonic Automotive.
Group 1 Automotive beats Sonic Automotive on 11 of the 16 factors compared between the two stocks.
About Sonic Automotive
Sonic Automotive, Inc. is an automotive retailer in the United States. The Company’s operating segments include Franchised Dealerships and EchoPark. Its Franchised Dealerships segment consists of retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle repair and maintenance services, and arrange finance and insurance products. The EchoPark segment consists of standalone specialty retail locations that provide customers an opportunity to search, buy, service, finance and sell pre-owned vehicles. Its franchised dealerships provide services, including sales of both new and used cars, and light trucks; sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, Fixed Operations), and arrangement of extended warranties, service contracts, financing, insurance and other aftermarket products (collectively, F&I) for its customers.
About Group 1 Automotive
Group 1 Automotive, Inc., through its subsidiaries, operates in the automotive retail industry. It sells new and used cars, light trucks, and vehicle parts; arranges vehicle financing; sells service and insurance contracts; and provides automotive maintenance and repair services. The company has operations primarily in the metropolitan areas of Alabama, California, Florida, Georgia, Kansas, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, Oklahoma, South Carolina, and Texas in the United States; 28 towns in the United Kingdom; and in the metropolitan markets of Sao Paulo, Parana, Mato Grosso do Sul, and Santa Catarina, Brazil. As of February 15, 2018, it owned and operated 230 franchises, 175 dealership locations, and 48 collision centers that offer 32 brands of automobiles. The company was founded in 1995 and is headquartered in Houston, Texas.
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