Lithia Motors, Inc. (LAD)

Lithia Motors, Inc. (LAD) is an operator of automotive franchises and a retailer of new and used vehicles and services. … Ford’s Strong Buy recommendation on Lithia Motors is the result of our systematic analysis on three basic characteristics: earnings strength, relative valuation and recent stock price movement. …

“Earnings strength is positive. Ford’s earnings momentum measures the acceleration or deceleration in trailing 12 month operating earnings per share growth. … Lithia Motors’ earnings have increased from $0.74 to an estimated $1.24 over the past five quarters, they have shown acceleration in quarterly growth rates when adjusted for the volatility of earnings. This indicates an improvement in future earnings growth may occur. … Relative valuation is positive. Lithia’s operating earnings yield of 6.3% ranks above 70% of the other companies in the Ford universe of stocks, indicating that it is undervalued. [Finally,] price movement is very positive. Lithia’s stock price is up 211.6% in the last 12 months, up 31.4% in the past quarter and up 13.1% in the past month. This historical performance should lead to above-average price performance in the next one to three months.”

Richard Segarra, CFA, Ford Equity Research Report, 7/1/11


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