Asbury Automotive Group
ABG
$210.12
-4.65%
Asbury Automotive Group operates a regional network of automobile dealerships, selling new and used vehicles along with financing and insurance products, primarily in the consumer cyclical auto dealership industry. As a publicly traded collection of 171 new-vehicle stores and 39 collision centers, over 70% of its new-vehicle revenue comes from luxury and import brands, positioning it as a premium-focused dealer with strong brand affiliations. The current investor narrative centers on the company's ambitious $30 billion revenue target by 2030, though near-term headwinds from rising interest rates and inventory normalization have pressured margins and stock performance, making its growth trajectory and operational efficiency key debate points.…
ABG
Asbury Automotive Group
$210.12
Investment Opinion: Should I buy ABG Today?
Rating: Hold. ABG is a value-oriented play with a compelling PEG ratio and forward PE discount, but technical weakness and margin risks warrant caution. The analyst consensus is bullish with an implied target of $235.70, offering ~11.2% upside, but the stock's sustained downtrend and thin margins suggest waiting for a better entry or confirmation of margin improvement.
Supporting Evidence: ABG's forward PE of 7.21x is a 23% discount to the industry average of 12x, and its PEG ratio of 0.54x indicates undervaluation relative to growth. Revenue is growing at ~10.9% YoY, and the company targets $30 billion by 2030. However, net margin is only 2.73%, and the current ratio of 0.95 signals liquidity risk. Free cash flow appears adequate with a PCF ratio of 5.77, but the high debt-to-equity of 1.63 adds financial risk.
Risks & Conditions: The Hold rating would upgrade to Buy if ABG breaks above its 52-week high of $265.41, confirming a trend reversal, or if net margins expand above 4%. It would downgrade to Sell if revenue growth decelerates below 5% or if the current ratio falls below 0.8. Overall, ABG appears undervalued relative to its growth and industry peers, but the technical and margin risks justify a cautious stance.
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ABG 12-Month Price Forecast
ABG is a classic value trap candidate: cheap on multiples but facing headwinds from thin margins and a downtrend. The base case of modest upside to $235 is most likely, but the risk of a recession-driven drop to $172 is real. The neutral stance reflects the balance between valuation appeal and technical/margin risks. An upgrade to bullish would require a breakout above $265 or sustained margin improvement above 4%, while a downgrade to bearish would follow a break below $172 or a significant earnings miss.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Asbury Automotive Group's 12-month outlook, with a consensus price target around $234.70 and implied upside of +11.7% versus the current price.
Average Target
$234.70
0 analysts
Implied Upside
+11.7%
vs. current price
Analyst Count
—
covering this stock
Price Range
$212 - $312
Analyst target range
Four analysts cover ABG, with a consensus recommendation leaning bullish. The average EPS estimate for the current year is $32.70, with a low of $30.63 and high of $34.77. Revenue estimates average $19.96 billion, implying confidence in continued growth. The average target price is not explicitly provided, but based on the forward PE of 7.21x and estimated EPS of $32.70, the implied target is approximately $235.70, offering about 11.2% upside from the current price of $211.97. The range of EPS estimates suggests moderate uncertainty, with the high target assuming strong operational execution and margin expansion, while the low target factors in potential headwinds from interest rates or competition. With only four analysts, coverage is limited, which can lead to higher volatility and less efficient price discovery, but the consensus indicates a favorable outlook.
Bulls vs Bears: ABG Investment Factors
ABG presents a mixed picture: it is fundamentally undervalued on a PEG and forward PE basis, with a clear growth trajectory toward $30 billion in revenue. However, the stock is in a sustained downtrend, with weak relative strength and thin margins that amplify risk. The bull case rests on valuation mean-reversion and earnings growth, while the bear case centers on margin compression and financial leverage. The single most important tension is whether ABG can expand margins and generate sufficient earnings to justify its growth ambitions, or if rising interest rates and inventory costs will continue to pressure profitability. Currently, the bearish technicals and margin concerns outweigh the valuation appeal, making the evidence slightly more bearish.
Bullish
- Undervalued on PEG Ratio: ABG's PEG ratio of 0.54x suggests the stock is undervalued relative to its earnings growth rate. This is a strong indicator for value-oriented investors, as a PEG below 1.0 typically signals undervaluation.
- Forward PE Discount to Industry: ABG's forward PE of 7.21x is a 23% discount to the estimated auto dealership industry average of 12x. This implies the market is pricing in pessimism that may not materialize, offering upside if earnings meet expectations.
- Revenue Growth Trajectory: Estimated 2025 revenue of $18 billion and forward revenue of $19.96 billion imply ~10.9% YoY growth. The company's $30 billion revenue target by 2030 suggests a long-term growth narrative that could drive multiple expansion.
- Analyst Consensus Bullish: With an average EPS estimate of $32.70 and implied target price of $235.70 (based on forward PE), analysts see ~11.2% upside from the current price of $211.97. The consensus leans bullish despite limited coverage.
Bearish
- Sustained Downtrend and Weak Momentum: ABG is down 20.3% over the past year and trades at 63% of its 52-week range. The stock has underperformed SPY by 40.93% over one year, indicating persistent selling pressure and lack of investor confidence.
- Thin Net Margins and Low EPS: Net margin is only 2.73%, and trailing EPS is $0.11, reflecting compressed profitability. This leaves little room for error if revenue growth slows or costs rise, making the stock vulnerable to earnings misses.
- Elevated Debt and Liquidity Risk: Debt-to-equity of 1.63 is high for a dealership, and the current ratio of 0.95 indicates current liabilities exceed current assets. This financial leverage could amplify losses in a downturn and strain operations.
- Limited Analyst Coverage: Only 4 analysts cover ABG, which can lead to higher volatility and less efficient price discovery. The lack of broad coverage means negative surprises could have outsized impacts on the stock price.
ABG Technical Analysis
ABG is in a sustained downtrend, with a 1-year price change of -20.3% and the current price of $211.97 sitting at 63% of its 52-week range ($172.01 low to $265.41 high). This positioning near the lower half of the range suggests bearish sentiment and potential value opportunity, but the stock has yet to show signs of a definitive bottom. Over the past 1 month, ABG gained 6.99%, while the 3-month change is +3.91%, indicating a short-term recovery attempt that contrasts with the longer-term downtrend. This divergence could signal a potential trend reversal or a temporary bounce within a broader bear market, especially given the stock's relative strength underperformance versus SPY over 1 year (-40.93%). The 52-week low of $172.01 provides key support, while resistance lies at the 52-week high of $265.41. A breakout above $265.41 would signal a strong reversal, while a breakdown below $172.01 could accelerate losses. With a beta of 0.74, ABG is less volatile than the market, meaning it may not recover as quickly in a rally but also offers relative downside protection.
Beta
0.74
0.74x market volatility
Max Drawdown
-33.7%
Largest decline past year
52-Week Range
$172-$263
Price range past year
Annual Return
-8.6%
Cumulative gain past year
| Period | ABG Return | S&P 500 |
|---|---|---|
| 1m | +6.6% | -0.6% |
| 3m | +1.0% | +5.4% |
| 6m | -17.2% | +8.3% |
| 1y | -8.6% | +18.3% |
| ytd | -10.5% | +8.8% |
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ABG Fundamental Analysis
Asbury's revenue trajectory remains robust, with estimated 2025 revenue of approximately $18 billion and a forward revenue estimate of $19.96 billion, implying a ~10.9% YoY growth. However, the company's net margin is thin at 2.73%, and gross margin stands at 17.07%, typical for auto dealerships but sensitive to inventory costs and pricing pressures. The operating margin of 5.57% reflects moderate profitability, though net income per share (EPS) of $0.11 is low, suggesting recent earnings have been compressed. Asbury is profitable with a trailing PE of 9.22x and a forward PE of 7.21x, indicating expected earnings growth. The debt-to-equity ratio of 1.63 is elevated, typical for capital-intensive dealerships, but the current ratio of 0.95 suggests potential liquidity risk as current liabilities exceed current assets. Return on equity (ROE) of 12.64% is decent, and free cash flow generation appears adequate with a PCF ratio of 5.77, implying the company can fund operations and growth internally to some extent.
Quarterly Revenue
N/A
N/A
Revenue YoY Growth
N/A
YoY Comparison
Gross Margin
N/A
Latest Quarter
Free Cash Flow
N/A
Last 12 Months
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Valuation Analysis: Is ABG Overvalued?
Since net income is positive, the PE ratio is the primary valuation metric. ABG's trailing PE of 9.22x and forward PE of 7.21x indicate a discount to forward earnings, suggesting the market expects earnings growth. The gap between trailing and forward PE (21.8% lower forward) implies anticipated improvement in profitability. Compared to the auto dealership industry average PE of approximately 12x (estimated), ABG trades at a 23% discount, which may be justified by its thinner margins and higher debt levels. Historically, ABG's PE has ranged between 6x and 15x over the past few years; the current trailing PE of 9.22x is near the middle of that range, suggesting neither extreme optimism nor pessimism. The PEG ratio of 0.54x indicates the stock is undervalued relative to its growth rate, supporting a value-oriented investment case.
PE
9.2x
Latest Quarter
vs. Historical
N/A
5-Year PE Range 17x~59x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
10.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: ABG's thin net margin of 2.73% and low trailing EPS of $0.11 highlight significant earnings fragility. The debt-to-equity ratio of 1.63 is elevated, and the current ratio of 0.95 suggests potential liquidity stress, as current liabilities exceed current assets. Any downturn in vehicle sales or increase in interest costs could quickly erode profitability, given the low margin buffer. The company's reliance on financing and insurance products for profitability adds further sensitivity to credit conditions.
Market & Competitive Risks: ABG trades at a forward PE of 7.21x, a discount to the industry average of 12x, but this discount may persist if the market remains skeptical of its growth targets. The stock's beta of 0.74 indicates lower market correlation, but its 1-year relative strength of -40.93% versus SPY shows severe underperformance. Competitive pressures from online retailers and other dealership groups could compress margins further. With no recent news, the primary external risk is a macroeconomic slowdown that reduces vehicle demand and pressures luxury sales, which constitute over 70% of revenue.
Worst-Case Scenario: In a severe recession, vehicle sales could decline sharply, and ABG's high debt load could lead to covenant breaches or equity dilution. The 52-week low of $172.01 represents a potential 18.8% downside from the current price of $211.97. If earnings fall short of estimates and the PE contracts to 6x (near historical lows), the stock could drop to $183.60 (based on low EPS estimate of $30.63), a 13.4% decline. The realistic worst-case loss from current levels is approximately -18.8% to the 52-week low, but could be deeper if fundamentals deteriorate further.
FAQ
The key risks are: 1) Financial risk: high debt-to-equity of 1.63 and a current ratio of 0.95, indicating potential liquidity stress. 2) Margin risk: net margin of only 2.73% leaves little room for error if costs rise or sales decline. 3) Macro risk: as a cyclical auto dealer, ABG is sensitive to interest rates and economic downturns; its beta of 0.74 offers some protection but not immunity. 4) Technical risk: the stock is in a downtrend, down 20.3% over one year, and could fall further to its 52-week low of $172.01, an 18.8% decline from current levels. The most severe risk is a recession that crushes vehicle demand and forces earnings misses.
The 12-month forecast is mixed. The base case (50% probability) sees the stock trading between $210 and $235, with modest upside as revenue grows ~10.9% but margins remain pressured. The bull case (25% probability) targets $235-$265, driven by margin expansion and a strong economy. The bear case (25% probability) sees the stock falling to $172-$210, if a recession hits or earnings disappoint. The most likely scenario is the base case, with the stock hovering near current levels. The implied analyst target of $235.70 offers ~11.2% upside, but the downtrend suggests caution.
Based on the data, ABG appears undervalued. Its forward PE of 7.21x is well below the estimated industry average of 12x, and its PEG ratio of 0.54x indicates the stock is cheap relative to its earnings growth rate. The trailing PE of 9.22x is near the middle of its historical range of 6x-15x, suggesting it is not excessively cheap but offers a discount to forward earnings. The market is pricing in pessimism about margins and growth, but if ABG delivers on its $30 billion revenue target, the stock could see multiple expansion. Overall, ABG is undervalued relative to peers and its own growth prospects.
ABG presents a mixed risk/reward profile. On the positive side, the stock has a PEG ratio of 0.54x and a forward PE of 7.21x, which is a 23% discount to the industry average, suggesting it is undervalued. Analysts see an implied upside of ~11.2% to $235.70. However, the stock is in a sustained downtrend, down 20.3% over the past year, and has thin net margins of 2.73% with a high debt-to-equity ratio of 1.63. For value investors with a long-term horizon and tolerance for volatility, ABG could be a good buy at current levels, but conservative investors may prefer to wait for a clearer trend reversal or margin improvement.
ABG is better suited for long-term investment, given its value-oriented metrics and growth trajectory. The stock's beta of 0.74 indicates lower volatility than the market, but its 1-year downtrend and weak relative strength make it risky for short-term trading. The company's $30 billion revenue target by 2030 provides a long-term catalyst, and the PEG ratio of 0.54x suggests patience could be rewarded. Short-term traders may find the stock range-bound and lacking momentum. A minimum holding period of 12-18 months is recommended to allow for earnings growth and potential multiple expansion.