America's Car-Mart: Investor Panic Gives You 2 Ways To Win

Summary

• America’s Car-Mart, the buy-here-pay-here auto dealer, has two problems in the eyes of investors: it is exposed to uncertainty around used car pricing, and to rising loan delinquencies.
• Both are real issues. But America's Car-Mart has succeeded through a range of economic environments in the past, compounding book value at 14% per share for the last two decades.
• Thanks to the uncertainty, America's Car-Mart is available at 0.8x book value; its lowest trading multiple since 2001, and way below its typical 1.5-2x range.
• The coming year will be challenging, and America's Car-Mart's superb recent earnings performance cannot be repeated. But the balance sheet is robust, and the medium term outlook remains positive.
• I like cheap value creators with two ways to win. Reversion to America's Car-Mart's historical trading multiple would be a double. Even without that, investors should earn 12%+ per year.

Apriori1

Background

America’s Car-Mart (NASDAQ:CRMT) is a buy here, pay here (BHPH) auto dealership network in the South-Central US, centered in Arkansas. BHPH is a strange beast. It blends elements of a traditional automotive dealership with a specialty finance business. In truth, neither part could work

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in CRMT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.