When Should You Buy Sonic Automotive, Inc. (NYSE:SAH)?

Sonic Automotive, Inc. (NYSE:SAH), is not the largest company out there, but it saw a decent share price growth of 12% on the NYSE over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a 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? Today we will analyse the most recent data on Sonic Automotive’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Sonic Automotive

What's The Opportunity In Sonic Automotive?

According to our valuation model, the stock is currently overvalued by about 26%, trading at US$57.62 compared to our intrinsic value of $45.71. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Sonic Automotive’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Sonic Automotive look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 42% over the next couple of years, the future seems bright for Sonic Automotive. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? SAH’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe SAH should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SAH for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for SAH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 2 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Sonic Automotive.

If you are no longer interested in Sonic Automotive, 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.