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If You Invested $1000 in Lithia Motors 10 Years Ago, This Is How Much You'd Have Now

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For most investors, how much a stock's price changes over time is important. Not only can it impact your investment portfolio, but it can also help you compare investment results across sectors and industries.

Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and 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, 2021, the company offered 40 vehicle brands across 278 stores in 22 states within the United States and three Canadian provinces. 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 — Domestic, Import and Luxury.

The Domestic unit 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, Kia, Mazda, Hyundai and Volkswagen. The Luxury segment comprises retail automotive franchises that sell new vehicles manufactured primarily by BMW, Mercedes-Benz Audi, Lexus, Acura, Porsche, Jaguar, Land Rover, Mini, Infiniti, Rolls-Royce, Lamborghini, McLaren, and Pagani.

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 49% of the company’s revenues in 2021), Used Vehicles (36%), Parts and service (9.2%), Fleet and Other (1.2%) and Finance and insurance (4.6%).

As of December 31, 2021, Lithia had liquidity of $1.5 billion, which was comprised of $174.8 million in cash and $1.3 billion availability on our credit facilities.

Bottom Line

While anyone can invest, building a lucrative investment portfolio takes research, patience, and a little bit of risk. If you had invested in Lithia Motors ten years ago, you're probably feeling pretty good about your investment today.

According to our calculations, a $1000 investment made in May 2012 would be worth $12,153.82, or a gain of 1,115.38%, as of May 27, 2022, and this return excludes dividends but includes price increases.

Compare this to the S&P 500's rally of 207.92% and gold's return of 14.10% over the same time frame.

Looking ahead, analysts are expecting more upside for LAD.

Lithia’s diversified product mix and multiple streams of income reduce its risk profile. Its ambitious target to generate $50 billion in revenues and $55-$60 in earnings per share by 2025 instills optimism. Enhanced digital solutions — including the Driveway e-commerce program — are helping Lithia to further boost profitability and market presence. Its acquisitions have added around $7 billion in total annualized revenues in 2021. However, stiff competition in the used-car market has generated a rising price spiral which might be risky for the firm’s prospects. Tight inventory and the ongoing chip crisis are adding to the woes. Elevated debt-levels restrict the company’s financial flexibility.  Thus investors are advised to wait for a better entry point.

Over the past four weeks, shares have rallied 5.46%, and there have been 5 higher earnings estimate revisions in the past two months for fiscal 2022 compared to none lower. The consensus estimate has moved up as well.

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