Penske Automotive Group (NYSE: PAG) and Sonic Automotive (NYSE:SAH) are both retail/wholesale companies, but which is the better stock? We will compare the two businesses based on the strength of their institutional ownership, risk, valuation, earnings, analyst recommendations, profitabiliy and dividends.

Profitability

This table compares Penske Automotive Group and Sonic Automotive’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Penske Automotive Group 1.70% 19.06% 3.93%
Sonic Automotive 0.80% 12.03% 2.38%

Volatility & Risk

Penske Automotive Group has a beta of 1.49, meaning that its stock price is 49% more volatile than the S&P 500. Comparatively, Sonic Automotive has a beta of 1.54, meaning that its stock price is 54% more volatile than the S&P 500.

Dividends

Penske Automotive Group pays an annual dividend of $1.24 per share and has a dividend yield of 2.8%. Sonic Automotive pays an annual dividend of $0.20 per share and has a dividend yield of 1.0%. Penske Automotive Group pays out 30.5% of its earnings in the form of a dividend. Sonic Automotive pays out 11.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Sonic Automotive has increased its dividend for 6 consecutive years.

Analyst Ratings

This is a summary of current ratings and target prices for Penske Automotive Group and Sonic Automotive, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Penske Automotive Group 1 3 3 0 2.29
Sonic Automotive 0 3 1 0 2.25

Penske Automotive Group currently has a consensus price target of $53.20, indicating a potential upside of 20.04%. Sonic Automotive has a consensus price target of $23.67, indicating a potential upside of 22.94%. Given Sonic Automotive’s higher probable upside, analysts clearly believe Sonic Automotive is more favorable than Penske Automotive Group.

Earnings and Valuation

This table compares Penske Automotive Group and Sonic Automotive’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Penske Automotive Group $20.38 billion 0.19 $672.30 million $4.06 10.92
Sonic Automotive $9.78 billion 0.09 $299.99 million $1.72 11.19

Penske Automotive Group has higher revenue and earnings than Sonic Automotive. Penske Automotive Group is trading at a lower price-to-earnings ratio than Sonic Automotive, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

39.0% of Penske Automotive Group shares are owned by institutional investors. Comparatively, 63.8% of Sonic Automotive shares are owned by institutional investors. 40.7% of Penske Automotive Group shares are owned by insiders. Comparatively, 30.3% of Sonic Automotive shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Penske Automotive Group beats Sonic Automotive on 12 of the 17 factors compared between the two stocks.

About Penske Automotive Group

Penske Automotive Group, Inc. is an international transportation services company. The Company operates automotive and commercial truck dealerships principally in the United States, Canada and Western Europe, and distributes commercial vehicles, diesel engines, gas engines, power systems, and related parts and services principally in Australia and New Zealand. The Company’s segments include Retail Automotive, consisting of its retail automotive dealership operations; Retail Commercial Truck, consisting of its retail commercial truck dealership operations in the United States and Canada; Other, consisting of its commercial vehicle and power systems distribution operations and other non-automotive consolidated operations, and Non-Automotive Investments, consisting of its equity method investments in non-automotive operations. The Company holds interests in Penske Truck Leasing Co., L.P. (PTL), a provider of transportation services and supply chain management.

About Sonic Automotive

Sonic Automotive, Inc. is an automotive retailer in the United States. The Company’s operating segments include Franchised Dealerships and EchoPark. Its Franchised Dealerships segment consists of retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle repair and maintenance services, and arrange finance and insurance products. The EchoPark segment consists of standalone specialty retail locations that provide customers an opportunity to search, buy, service, finance and sell pre-owned vehicles. Its franchised dealerships provide services, including sales of both new and used cars, and light trucks; sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, Fixed Operations), and arrangement of extended warranties, service contracts, financing, insurance and other aftermarket products (collectively, F&I) for its customers.

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