AutoCanada update November 5, 2016

AutoCanada is updated for its Q2 earnings release and rated Buy.

The earnings results were disappointing and the stock was down 3.0% on Friday and had been down about 7% Friday morning before recovering somewhat during and after the conference call.

This growth-by-acquisition company was once a high flier and reached a needle peak of over $90 in 2014. The stock price has been hammered down due to its concentration of auto dealerships in Alberta. Earnings per share have also declined but not nearly as much as the stock price.

In retrospect, I was too early in adding it to this site as a Buy at just over $40 in 2015. But the relevant question now is whether it offers good value and strong potential returns at its current price.

Despite a drop in its sales and earnings and despite a few unprofitable dealerships it remains strong financially. The company continues to grow by acquisition. It is likely trading at a value that is lower than the amount it could receive if it sold off all its individual dealerships to private owners. In 2014 it was trading at well above such a level.

I believe that the indications are that this company does represent good value at this price. I added to my position on Friday.