Examining Sonic Automotive’s Value After 35% One Year Surge and Industry Shifts

If you are standing at the crossroads of what to do with Sonic Automotive stock right now, you are not alone. This is one of those moments seasoned investors relish. The numbers are intriguing, and the story is compelling. Sonic has grabbed the spotlight with a price of $73.64 at last close, but you might be wondering whether that is an opportunity or a warning sign. While the last week and month saw the share price slide by -2.8% and -11.4% respectively, it is hard to ignore the much brighter long-term picture. Year-to-date, Sonic is up 18.1%, and over the past year, the stock has gained an impressive 34.7%. Stretch that timeline even further: three-year and five-year returns both handily outpace the broader market at 80.2% and 99.3% respectively.

Some of this momentum can be traced to shifting trends across the auto retail sector, with consumer demand and supply chain dynamics both reshaping how investors weigh potential risks and rewards. As the landscape evolves, so does the appetite for companies like Sonic, and the big question is whether the current price truly reflects the company’s worth.

That is where valuation comes into play. Across six major valuation checks, Sonic scores a strong 4, meaning it is undervalued on most metrics analysts care about. But here is the thing: not all valuation approaches are created equal, and before making any decisions, it is worth exploring how each one stacks up. Discover a smarter way to actually size up Sonic’s value at the end of this article.

Sonic Automotive delivered 34.7% returns over the last year. See how this stacks up to the rest of the Specialty Retail industry.

Approach 1: Sonic Automotive Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model works by projecting a company’s future cash flows and then discounting those back to today’s value to estimate what the business is worth now. This approach considers both the company’s expected growth and the time value of money, essentially putting all future expectations on today’s balance sheet.

Sonic Automotive’s latest reported Free Cash Flow is $391.6 Million. Analysts model growth in cash flows over the next several years, projecting $337 Million in Free Cash Flow by 2028. For longer periods, Simply Wall St extrapolates analyst estimates to outline potential cash flows up to ten years in advance, suggesting continued growth but at moderating rates as time goes on.

• 2026 projected FCF: $260.5 Million (from Analyst x3)
• 2028 projected FCF: $337 Million (from Analyst x1)
• 2035 projected FCF: $566.1 Million (extrapolated)

When all these future figures are discounted back to today and totaled, the DCF suggests an intrinsic value of $121.83 per share. That compares to the current share price of $73.64, which means the stock trades at a striking 39.6% discount to its calculated fair value, indicating it is notably undervalued by this measure.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sonic Automotive.

Our Discounted Cash Flow (DCF) analysis suggests Sonic Automotive is undervalued by 39.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Sonic Automotive Price vs Earnings

For profitable companies like Sonic Automotive, the Price-to-Earnings (PE) ratio is a widely used and effective valuation metric. The PE ratio helps investors gauge what they are paying for each dollar of earnings, making it especially meaningful when the company is consistently profitable and has a track record of stable earnings growth.

It's important to remember that what counts as a "normal" or "fair" PE ratio will vary. Investors are usually willing to pay higher multiples when they expect strong future earnings growth or perceive less risk, while lower multiples are typical for slower-growing or riskier businesses. Comparing Sonic’s current PE ratio to benchmarks is the first step to see how it stacks up.

Right now, Sonic Automotive trades at a PE ratio of 15.94x. That is slightly below both the Specialty Retail industry average of 17.10x and the peer group average of 12.46x. To improve on these simple benchmarks, Simply Wall St uses a proprietary “Fair Ratio” model. For Sonic, the Fair PE Ratio is 18.21x, which reflects factors beyond just past earnings such as expected earnings growth, profit margins, the company’s size, risks, and its position in the broader retail sector.

The Fair Ratio approach goes much further than industry or peer comparisons and captures the full picture by accounting for what really drives long-term value. In Sonic’s case, the actual PE ratio is notably below its Fair Ratio, suggesting that the stock is undervalued using this lens.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sonic Automotive Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives, Simply Wall St’s unique approach to connecting a company’s story with its numbers. This gives you a holistic and dynamic way to make investment decisions.

A Narrative is a concise, data-driven explanation that ties your own perspective or outlook on a company directly to a financial forecast and ultimately to a fair value. It allows you to put your story behind the numbers, outlining why you expect a company like Sonic Automotive to grow, how its margins might evolve, and what this means for its future price. Narratives live on Simply Wall St’s Community page, where millions of investors use them to test their ideas and see how new information, such as earnings or news, instantly updates a company’s fair value.

By building your own or reviewing shared Narratives, you gain the power to compare fair value estimates with the current price, making it easier to decide when to buy or sell. For Sonic Automotive, you might find one investor who sees significant upside, forecasting a price target of $95 based on strong expansion and rising margins, while another takes a more cautious view, setting a price target of $72 due to concerns about future risks and margin pressures.

Do you think there's more to the story for Sonic Automotive? Create your own Narrative to let the Community know!

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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