America's Car-Mart, Inc. (NASDAQ: CRMT) announced its operating results for the third fiscal quarter ended January 31, 2013 on February 18, 2013. Its numbers were quite impressive, with significant increase seen in earnings per share and revenue. America's Car-Mart is America's largest publicly held automotive retailer, which operates 120 automotive dealerships in ten states. The company executes its business activities through its subsidiaries.
Before these operating results were released, most analysts, notably Zacks, held a strong sell rating on this stock. At that time, America's Car-Mart was trading around $40 per share. Analysts were right for a while, as this stock plummeted to about $38 per share within the succeeding two weeks. However, upon release of these results, America's Car-Mart's stock rose by $4.37 to give the highest share price until that date since the beginning of 2013. Since then, the stock has continued to soar to around $47 per share. I checked, but I couldn't find many analysts commenting on the new trend. I presume they just don't know how to switch their ratings from a strong sell to at least a hold since there would be a non-strong sell somewhere in-between.
One thing that these analysts don't seem to notice is the trend in the auto industry. People are going for new autos, with many autos on the American road waning. Carmakers like General Motors Company (NYSE: GM) and Ford Motor Company (NYSE: F) recently witnessed a significant increase in sales in North America. Truth be told, not everybody can afford new autos, which is where America's Car-Mart comes in with used car dealerships. Perhaps this is the reason for the increased sales it witnessed during the third fiscal quarter. Let's take a look at the numbers and compare them with those from the same prior year quarter.
America's Car-Mart's earning per share (NYSEARCA:EPS) increased by 15 percent compared to the same fiscal quarter of the year before, showing improved profitability. Its revenue increased by 12.9 percent on a year-over-year basis. On a sequential basis, there was improvement across the board. The company also opened three new dealerships during the last quarter. CRMT spent $88 million to invest on the company's outstanding shares, which reiterates the company's belief in its activities. The only cause for alarm is the company's debt-to-equity ratio, which stands at 56.6 percent. However, the cause for optimism here is the significant improvement in its operating results. In addition, America's Car-Mart is in a fairly strong financial position.
Considering that many U.S. residents are still purchasing new or used cars, I suggest that further improvement will be seen in its next operating results. Sales are likely to rise to new heights within the current quarter. Contrary to what most analysts believe, I give America's Car-Mart a hold rating, at least for now. However, investors with foresight could seize this opportunity to enter into this stock, as all trends point to a larger share price in the near future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.