Lithia Motors (NYSE:LAD) has more than tripled in price over the past year. The longer term performance has also been not less than stellar. This car dealership might not be an exciting tech company, but that shouldn't put you off. I've been keeping this company on my watchlist and to be honest, I wish I've spotted it earlier. This is because even after the run up in 2020, Lithia Motors is still a buy at these current prices.
Company overview
I already stated that Lithia owns and operates car dealerships, but let's see how Morningstar sums up the business:
Lithia Motors is a retailer of new and used vehicles and related services. The company offers 30 brands of vehicles at about 200 stores throughout the western United States and East Coast. The company has expanded largely through the acquisition of dealerships in smaller regional markets and via deals in New York and Southern California. Annual revenue in 2019 was $12.7 billion. In 2019, new-car sales were about 54% of total revenue. Lithia was founded in 1946, went public in 1996, and is now one of the largest U.S. auto dealerships. It is based in Medford, Oregon.
Source: Morningstar
In this case, Morningstar gives a pretty spot on description of this enterprise. Not only with how Lithia runs its day-to-day operations, but also how it grows. Purchasing is, as we shall see later, the main driver of growth for the company. The business of buying and selling cars shouldn't be that unfamiliar to most people. It is a fairly low margin sector and scale can be one of the only advantages over peers. However to speak of a serious moat is a bit exaggerating. So in the car retailing space cost controls and management competence is key to achieve superior results. Here, so far, Lithia has out shined the listed competitors over the last
