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Here's How Much You'd Have If You Invested $1000 in Lithia Motors a Decade Ago

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For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.

The fear of missing out, or FOMO, also plays a factor in investing, especially with particular tech giants, as well as popular consumer-facing stocks.

What if you'd invested in Lithia Motors (LAD - Free Report) ten years ago? It may not have been easy to hold on to LAD for all that time, but if you did, how much would your investment be worth today?

Lithia Motors' Business In-Depth

With that in mind, let's take a look at Lithia Motors' main business drivers.

Lithia Motors, Inc. is one of the leading automotive retailers of new and used vehicles, and related services in the United States. As of Dec 31, 2020, the company offered 33 vehicle brands across 209 stores in 22 states within the United States. The core brands offered by Lithia Motors include Chrysler, General Motors, Toyota, Subaru, Honda, Acura, Ford, BMW, MINI, Nissan and Hyundai.

Lithia Motors offers tailored service complemented through its nationwide network. Further, it has the largest online inventory with competitive pricing on vehicles and service. In July 2020, Lithia introduced Driveway, e-commerce platform, that allows the company to deliver differentiated, proprietary digital experiences.

Apart from a wide range of new and used vehicles, the company offers finance and insurance products, and automotive repair and maintenance. It focuses on diversification of products, services, brands and geographic locations to reduce dependence on one manufacturer along with reducing exposure to shifting consumer preferences.

Lithia Motors has three reportable segments as follows —

The Domestic segment has retail automotive franchises that sell new vehicles manufactured by Chrysler, General Motors and Ford.

The Import segment comprises retail automotive franchises that sell vehicles manufactured primarily by Honda, Toyota, Subaru, Nissan and Volkswagen.

The Luxury segment comprises retail automotive franchises that sell new vehicles manufactured primarily by BMW, Mercedes-Benz and Lexus.

Apart from new vehicles, all the above segments deal in used vehicles, parts and automotive services, and automotive finance and insurance products for the brands.

Lithia’s business mix consists of New Vehicles (accounted for about 51.6% of the company’s revenues in 2020), Used Vehicles (32.8%), Parts and service (10.3%), Fleet and Other (0.8%) and Finance and insurance (4.5%). As of December 31, 2020, Lithia had liquidity of $1.4 billion, which was comprised of $160.2 million in cash and $1.2 billion availability on our credit facilities.

During 2020, the company acquired thirty stores and divested five stores. It invested $1.2 billion, to acquire the stores and expects these acquisitions to add more than $3.5 billion in annual revenues.

Bottom Line

Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Lithia Motors, if you bought shares a decade ago, you're likely feeling really good about your investment today.

According to our calculations, a $1000 investment made in July 2011 would be worth $18,069.50, or a 1,706.95% gain, as of July 13, 2021. Investors should keep in mind that this return excludes dividends but includes price appreciation.

The S&P 500 rose 233.78% and the price of gold increased 10.62% over the same time frame in comparison.

Analysts are forecasting more upside for LAD too.

Lithia’s diversified product mix and multiple streams of income reduce its risk profile. Enhanced digital solutions — including Driveway e-commerce program — are helping Lithia to further boost profitability and market presence. Lithia’s acquisition of dealerships helps to increase its market share and positions it for long term growth.Investor-friendly moves of the firm is driving shareholders’ confidence. However, rising debt levels play a spoilsport and may restrict the company’s financial flexibility to tap onto growth opportunities. With automakers scrambling to meet the rising demand of vehicles amid global chip crunch, Lithia’s near-term sales may get affected. As it is, high competition, especially in the used car market, also remains a headwind. Hence, the stock warrants a cautious stance now. 

The stock has jumped 9.20% over the past four weeks. Additionally, no earnings estimate has gone lower in the past two months, compared to 2 higher, for fiscal 2021; the consensus estimate has moved up as well.

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