Financial Analysis: Rush Enterprises (RUSHA) versus Sonic Automotive (SAH)

Sonic Automotive (NYSE: SAH) and Rush Enterprises (NASDAQ:RUSHA) are both small-cap retail/wholesale companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, institutional ownership, dividends, profitability, analyst recommendations, earnings and valuation.

Analyst Recommendations

This is a breakdown of current ratings for Sonic Automotive and Rush Enterprises, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sonic Automotive 0 3 1 0 2.25
Rush Enterprises 0 2 4 0 2.67

Sonic Automotive presently has a consensus target price of $23.33, indicating a potential upside of 9.29%. Rush Enterprises has a consensus target price of $51.00, indicating a potential upside of 17.21%. Given Rush Enterprises’ stronger consensus rating and higher possible upside, analysts plainly believe Rush Enterprises is more favorable than Sonic Automotive.

Valuation and Earnings

This table compares Sonic Automotive and Rush Enterprises’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sonic Automotive $9.87 billion 0.09 $92.98 million $1.85 11.54
Rush Enterprises $4.71 billion 0.37 $172.12 million $2.29 19.00

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

Profitability

This table compares Sonic Automotive and Rush Enterprises’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sonic Automotive 0.92% 11.09% 2.23%
Rush Enterprises 3.64% 11.09% 3.85%

Dividends

Sonic Automotive pays an annual dividend of $0.24 per share and has a dividend yield of 1.1%. Rush Enterprises does not pay a dividend. Sonic Automotive pays out 13.0% of its earnings in the form of a dividend. Sonic Automotive has raised its dividend for 2 consecutive years.

Institutional & Insider Ownership

63.6% of Sonic Automotive shares are held by institutional investors. Comparatively, 77.4% of Rush Enterprises shares are held by institutional investors. 32.3% of Sonic Automotive shares are held by company insiders. Comparatively, 11.2% of Rush Enterprises shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Volatility & Risk

Sonic Automotive has a beta of 1.6, suggesting that its stock price is 60% more volatile than the S&P 500. Comparatively, Rush Enterprises has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500.

Summary

Rush Enterprises beats Sonic Automotive on 11 of the 16 factors compared between the two stocks.

Sonic Automotive Company Profile

Sonic Automotive, Inc. operates as an automotive retailer in the United States. It operates in two segments, Franchised Dealerships and Pre-Owned Stores. The Franchised Dealerships segment is involved in the sale of new and used cars and light trucks, and replacement parts; provision of vehicle maintenance, manufacturer warranty repair, and paint and collision repair services; and arrangement of extended warranties, service contracts, financing, insurance, and other aftermarket products. The Pre-Owned Stores segment operates stand-alone pre-owned specialty retail locations, which enable customers to search, buy, service, finance, and sell pre-owned vehicles. As of December 31, 2017, the company operated 114 new vehicle franchises in 13 states representing 25 brands of cars and light trucks; 18 collision repair centers; and 9 pre-owned vehicle stores. Sonic Automotive, Inc. was founded in 1997 and is based in Charlotte, North Carolina.

Rush Enterprises Company Profile

Rush Enterprises, Inc., through its subsidiaries, operates as an integrated retailer of commercial vehicles and related services in the United States. The company operates a network of commercial vehicle dealerships under the Rush Truck Centers name. Its Rush Truck Centers primarily sell commercial vehicles manufactured by Peterbilt, International, Hino, Ford, Isuzu, Mitsubishi Fuso, IC Bus, or Blue Bird; provides new and used commercial vehicles, and aftermarket parts, as well as service and repair, financing, and leasing and rental services; and offers property and casualty insurance, including collision and liability insurance on commercial vehicles, cargo insurance, and credit life insurance to its commercial vehicle customers. The company also offers equipment installation and repair, parts installation, and paint and body repair services; new vehicle pre-delivery inspection, truck modification, and natural gas fuel system installation services; and body, chassis upfit, and component installation services, as well as sells tires for use on commercial vehicles. It serves regional and national truck fleets, corporations, local governments, and owner operators. The company operates a network of centers located in the states of Alabama, Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Missouri, Nevada, New Mexico, North Carolina, Ohio, Oklahoma, Tennessee, Texas, Utah, and Virginia. Rush Enterprises, Inc. was founded in 1965 and is headquartered in New Braunfels, Texas.

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