AutoCanada updated March 13, 2024

The report on AutoCanada is updated and rated Speculative Buy at $23.75. Revenues have been increasing strongly. Earnings per share are volatile and have declined in recent quarters after very strong results in 2021 and 2022. The gross margin or markup on new vehicles seems very strong at over $5000 per vehicle. And then they make an additional $3500 on finance and insurance products on average. Management is aggressive but admits that certain cost have been too high and they are working on improvements.

Profits should increase in the long term but the high debt level of the company is a concern. It will benefit if interest rates decline as expected.

One investment company (EdgePoint) has made a very large bet on AutoCanada and owns about 28% of the shares. This is a strong vote of confidence.

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