AutoCanada Inc., a Canadian-based auto dealership with several locations, is attempting bring together a divided marketplace, recover their margins, and make up for a downturn in the US market.
The stock still appears overvalued compared to peer averages, and we recommend investors wait on the sidelines for now.
AutoCanada Inc. is an Edmonton, Canada-based multi-location automotive dealership. The company has essentially been on a path to consolidate the fragmented auto dealership space however deteriorating margins and a failure to realize synergies has plummeted the stock price in recent years. Based on peer averages, the company still appears undervalued and we recommend investors to sit on the sidelines for now.
Products and services
AutoCanada currently operates 51 franchised dealerships in Canada and 14 in the United States employing over 4,200 people. Its primary offerings include selling and servicing of new and used vehicles comprised of 27 brands with brand names such as GMC, Chrysler, Cadillac, Audi, Ford, BMW & Mercedes-Benz. It also provides leasing and insurance services to its customers, arranged by 3rd party insurance and financing providers.
Business Model Analysis
Roll-up merger has been the company's go-to strategy to drive growth as industry consolidation continues in a move from "mom & pop" dealerships to large groups. The company has deployed capital north of $487 million in deals since 2013 to buy smaller dealerships.
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