Lithia Motors (NYSE:LAD) and Advance Auto Parts (NYSE:AAP) are both retail/wholesale companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, dividends, profitability, institutional ownership, risk and valuation.
Risk and Volatility
Lithia Motors has a beta of 1.88, suggesting that its stock price is 88% more volatile than the S&P 500. Comparatively, Advance Auto Parts has a beta of 1.27, suggesting that its stock price is 27% more volatile than the S&P 500.
Earnings and Valuation
This table compares Lithia Motors and Advance Auto Parts' revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Lithia Motors | $12.67 billion | 0.71 | $271.50 million | $11.76 | 28.74 |
| Advance Auto Parts | $9.71 billion | 1.14 | $486.90 million | $8.19 | 20.00 |
Advance Auto Parts has lower revenue, but higher earnings than Lithia Motors. Advance Auto Parts is trading at a lower price-to-earnings ratio than Lithia Motors, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Lithia Motors and Advance Auto Parts' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Lithia Motors | 2.82% | 23.52% | 6.02% |
| Advance Auto Parts | 4.84% | 15.75% | 4.86% |
Institutional and Insider Ownership
83.4% of Lithia Motors shares are held by institutional investors. Comparatively, 93.9% of Advance Auto Parts shares are held by institutional investors. 4.0% of Lithia Motors shares are held by company insiders. Comparatively, 4.1% of Advance Auto Parts shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Analyst Ratings
This is a breakdown of current ratings and recommmendations for Lithia Motors and Advance Auto Parts, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Lithia Motors | 0 | 5 | 6 | 0 | 2.55 |
| Advance Auto Parts | 4 | 7 | 12 | 0 | 2.35 |
Lithia Motors presently has a consensus target price of $296.00, indicating a potential downside of 12.43%. Advance Auto Parts has a consensus target price of $151.9091, indicating a potential downside of 7.24%. Given Advance Auto Parts' higher possible upside, analysts clearly believe Advance Auto Parts is more favorable than Lithia Motors.
Dividends
Lithia Motors pays an annual dividend of $1.24 per share and has a dividend yield of 0.4%. Advance Auto Parts pays an annual dividend of $1.00 per share and has a dividend yield of 0.6%. Lithia Motors pays out 10.5% of its earnings in the form of a dividend. Advance Auto Parts pays out 12.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lithia Motors has increased its dividend for 6 consecutive years and Advance Auto Parts has increased its dividend for 1 consecutive years.
Summary
Advance Auto Parts beats Lithia Motors on 9 of the 17 factors compared between the two stocks.
