A question on Eagers Automotive, which put out a nice trading update.
So, thinking it through.
APE put out a nice update, a modest upgrade to prior guidance. Good for them. Here’s how recent activity looks (an acquisition in there, but obviously strong trading conditions).
Car prices, new, used, trucks, all that and more, have been very strong (shortages, chips, fires, COVID, etc). And so, on the balance of probability, is there any chance that some of those things might go into reverse? Well, it seems likely, to me.
Is it likely that these margins are sustainable? Doesn’t seem wildly plausible to me.
Worrying about whether a business is over-earning or not matters more so when either a) there’s leverage, or b) there’s massive overvaluation.
The stock is on ~10.5x forward. That sure helps. But all of the above is useful for understanding just what is the nature of your opportunity.
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