A Fresh Look at AutoNation (AN) Valuation After Major Chicago Luxury Deal Expands Revenue and Market Reach

If you have been following AutoNation (NYSE:AN), you know that big moves tend to follow big headlines. This time, the company’s latest announcement is catching eyes for good reason: AutoNation has just acquired two leading luxury stores in Chicago, Fletcher Jones Audi and Mercedes-Benz of Chicago, adding approximately $325 million in annual revenue and ramping up its presence in the high-end vehicle market. For investors, this isn’t just about another dealership; it is a calculated step into a lucrative segment, a sign that AutoNation might be revving up for new growth opportunities.

These new additions boost AutoNation’s position in a key region, building on a series of business expansions and new store openings this year. The company’s stock has climbed almost 30% year to date and is up 19% over the past twelve months, suggesting some steady momentum. While share price strength has drawn attention, it has also been supported by annual revenue and net income growth in the most recent period. Momentum appears to be on AutoNation’s side, at least for now.

With these growth-focused moves already fueling the stock’s run this year, the key question is whether AutoNation remains attractively valued, or if the market has already factored in this next phase of expansion.

Most Popular Narrative: 1.9% Undervalued

According to the most widely followed narrative, AutoNation is trading just below its assessed fair value, hinting at a modest upside potential.

AutoNation's robust growth in After-Sales (service, parts, and collision), which delivered record revenue and expanding gross margins, positions the company to benefit from the long-term increase in vehicle age and a growing car parc in the U.S. This secular shift is likely to underpin resilient, recurring high-margin revenue and support future earnings stability and growth.

Ready to uncover the secrets behind AutoNation’s valuation call? The most-watched narrative banks on trends reshaping the industry and future profit margins that could surprise even seasoned bulls. Want to know what assumptions fuel this near-fair value estimate, and whether the stock might soon break out? There is more to the story than just recent headlines, and the bold revenue and margin targets are not what you would expect for a traditional auto retailer.

Result: Fair Value of $221.91 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, shifts toward direct-to-consumer auto sales and faster electric vehicle adoption could squeeze AutoNation's margins and challenge its long-term growth prospects.

Find out about the key risks to this AutoNation narrative.

Another View: Discounted Cash Flow Model

While analyst price targets suggest AutoNation is fairly valued, our DCF model offers a different perspective. It indicates the shares might be trading well below their intrinsic worth. Could this method reveal hidden value that traditional estimates miss?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AutoNation for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own AutoNation Narrative

If these valuations do not match your perspective or you want to dig deeper, you can craft your own view from scratch in just a few minutes. Do it your way.

A great starting point for your AutoNation research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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