Opinions Jim Huang
AutoCanada Inc.ACQ.TOWATCHJul 06, 2017
Jim HuangStock price when the opinion was issued
As of Jun 05, 2026. Market Open.
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Premium contentOur PAST TOP PICK with ACQ has triggered its stop at $23. To remain disciplined, we recommend covering the position at this time. This will result in a net investment gain of 16%, when combined with our previous recommendations.
Premium contentPremium contentACQ, who holds 65 auto locations and has over 15,000 vehicles in inventory, is reiterated as a TOP PICK. Recently reported earnings showed a 30% increase in EPS. Cash reserves are being prudently used to aggressively retire debt. It trades at 7x earnings, 1.2x book and supports a 21% ROE. We continue to recommend a stop at $21, looking to achieve $31 -- upside potential of 24%. Yield 0%
(Analysts’ price target is $31.50)Premium contentPremium contentWith a network of 65 auto dealerships in North America, we reiterate ACQ as a TOP PICK. It trades at 7x earnings, supports a 17% ROE and is right at book value. Cash reserves are growing, while the company aggressively retires debt and buys back shares. We recommend trailing up the stop (from $15) to $17, looking to achieve $26 -- upside potential of 23%. Yield 0%
(Analysts’ price target is $26.35)Premium contentWe reiterate ACQ as a TOP PICK. Strong consumer demand and constraints on light vehicle supply have combined to create record industry profitability in the auto dealership sector. Higher interest rates have taken away some of the momentum, but the company recently reported higher cash reserves, while they aggressively retired debt and bought back shares. It trades under book value and 7x earnings. We continue to recommend a stop-loss at $15, looking to achieve $26 -- upside potential of 31%. Yield 0%
(Analysts’ price target is $26.35)Premium contentWe reiterate this operator of auto dealership franchises as a TOP PICK. It trades at 7x earnings and under book value. It supports a ROE of 19%. Cash reserves are growing while debt is aggressively retired and shares bought back. We recommend trailing up the stop (from $13) to $15, looking to achieve $26 -- upside potential of 40%. Yield 0%
(Analysts’ price target is $26.35)Premium contentACQ operates 85 auto dealerships in Canada and also in Illinois. They also operate service and repair centres, which processed 900,000 orders in 2022. Recently reported earnings showed an almost doubling of net income. It trades at 7x earnings, 1.1x book value and supports an 18% ROE. Cash reserves were steady, despite aggressively retiring debt and buying back stock. We recommend a stop-loss at $13, looking to achieve $30 -- upside over 75%. Yield 0%
(Analysts’ price target is $35.31)
Greg NewmanGreg Newman
Jason MannBilly Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Up 100% this year. A leveraged recovery play. EPS should more than double this year. Debt and execution is the main risk for the company. Balance sheet is heavily levered but its inventory has value. 20x earnings but it has beat estimates by 51%. Unlock Premium - Try 5i Free
Stockchase Insights
Publicly traded auto dealers which own a lot of dealerships across Canada, but their primary strength is in Western Canada, which is why they took a hit for the last couple of years. That has now stabilized and they’ve also diversified outside of Alberta. There is a sense that the auto cycle is peaking, so there’s not a lot of upside for the overall picture. Last quarter, they seem to have underperformed to what National sales have done in the Western provinces. It has to be figured out whether or not they can demonstrate cost control and leverage and continue to diversify.