Is It Time To Consider Buying Lithia Motors, Inc. (NYSE:LAD)?

Lithia Motors, Inc. (NYSE:LAD), is not the largest company out there, but it saw a significant share price rise of 29% in the past couple of months on the NYSE. While good news for shareholders, the company has traded much higher in the past year. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Lithia Motors’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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What's The Opportunity In Lithia Motors?

Good news, investors! Lithia Motors is still a bargain right now. Our valuation model shows that the intrinsic value for the stock is $442.82, but it is currently trading at US$351 on the share market, meaning that there is still an opportunity to buy now. However, given that Lithia Motors’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Check out our latest analysis for Lithia Motors

What kind of growth will Lithia Motors generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Lithia Motors' earnings over the next few years are expected to increase by 39%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since LAD is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on LAD for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LAD. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Lithia Motors at this point in time. At Simply Wall St, we found 1 warning sign for Lithia Motors and we think they deserve your attention.

If you are no longer interested in Lithia Motors, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.