Our report for AutoCanada is updated and the stock is rated Speculative Buy at $17.42. It could have been rated higher but I wanted to be conservative given that the earnings could decline in 2016 due to the recession in Alberta where 45% of its dealerships are located. At this point AutoCanada appears to be trading at a discount price that its dealerships would likely fetch if they were sold off. AutoCanada has no intention of doing that but the opportunity to buy a small portion of these dealerships in the stock market at a lower price proportionately than what whole dealerships might sell for seems attractive.
If you think about the most prosperous looking businesses in your Town or City, auto dealerships will usually make that list. I feel good about owning a share of these dealerships.
It is true that AutoCanada has fallen 57% since it was first added to this site rated Buy last July. Many investors would shy away from stocks that have declined. Investors who focus on fundamentals find that stocks get more attractive as they fall in price, all else equal. Of all else is seldom equal and in this case AutoCanada’s earnings are down sinc last July. But our analysis suggests that the price has declined more than the earnings.