Group 1 Automotive Inc. (GPI) is up more than 200% in the last 8 months, but analysts see more upside, with the next-year estimate projecting 35% earnings growth.

Company Description

Group 1 Automotive, Inc., through its subsidiaries, operates in the automotive retail industry selling both new and used cars and providing various services. The company was founded in 1995 and has a market cap of $659 million.

Shares of GPI are up huge over the last 8 months after bottoming out just shy of $8 in mid February. The company’s recent third-quarter results, reported on Oct 27 came in better than expected, and while shares did trade lower off the news, the macro-level trend higher is still in tact.

Third-Quarter Results

Sales were down 14% from last year to $1.2 billion, but earnings came in strong at 71 cents per share, one penny ahead of the Zacks Consensus Estimate. The company has beat in each of the last four quarter by an average of 7 cents, or 202%.

Group 1 noted that its results were helped by the cash for clunkers program, but added that it is utilizing more effective inventory management processes and cutting costs to drive its earnings moving forward. At the end of the quarter its new vehicle inventory was $298.7 million, down $76 million from the previous quarter and $370.6 million from last year.

Group 1 also said it aims to reduce its 2009 SGA expenses by $120 million from the previous year.

Estimates Jump

Estimates moved higher on the good quarter and optimistic view, with the current year adding 28 cents and moving to $1.75. The next-year estimate is bullish, pegged at $2.36, a 35% growth projection.


In spite of the recent gains, this stock still looks reasonably priced, trading with a forward P/E of 15X, a discount to the overall market.

The Chart

Shares of GPI pulled back a bit on the earnings announcement but have since recovered after rebounding from a long-term trend line. The 52-week high is close at hand just above $35.

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