ASBURY AUTOMOTIVE GROUP, INC. (ABG): what the price assumes

boothcheck covers ASBURY AUTOMOTIVE GROUP, INC. (ABG) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/ABG

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 7: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 7.5% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.7%); the inversion above states its own rate.

Per-Model Detail (n=16)

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• New vehicles are 53% of revenue and almost none of the profit growth, with the FY2025 10-K reporting that "The $123.0 million (4%) increase in gross profit during 2025 was the result of a $121.3 million (9%) increase in parts and service gross profit".
• Used vehicles are where the pressure shows, the same filing recording that "Same store used vehicle revenue decreased by $185.0 million (4%) due to a $210.9 million (5%) decrease in used vehicle retail revenue".
• Second-quarter results arrive before the open on July 28, 2026, with the street looking for Q2 2026 consensus earnings per share of $6.30, a decline of about 15% against the same quarter last year.

Bull Case

Selling cars is not what this company does for a living, and any model that reads it as a car retailer will get the answer wrong. New vehicles are 53% of revenue. Used retail is another 25%. Together they are more than three quarters of the top line and a much smaller share of what the business actually earns, because a new car passes through at a margin measured in low single digits. The money is made afterwards, in the service bay and in the finance office, and that is where the numbers have been moving.

The FY2025 10-K makes the point without needing interpretation: "The $123.0 million (4%) increase in gross profit during 2025 was the result of a $121.3 million (9%) increase in parts and service gross profit, a $13.6 million (6%) increase in used vehicle gross profit and a $6.5 million (1%) increase in F&I gross profit". Effectively all of the gross-profit growth came from repairing and maintaining cars. That business is only 11% of revenue, it is not cyclical in the way vehicle sales are, and it grows with the age and number of cars on the road rather than with this year's showroom traffic.

Service also grows for a reason the company can influence. The same filing reports that "Same store parts and service revenue increased $73.7 million", roughly 3%, with the increase driven by "a $52.0 million (4%) increase in customer pay revenue". Customer-pay work is the discretionary kind, the sort a driver chooses to have done rather than the warranty work a manufacturer sends. Growth there says the dealership is retaining the customer after the warranty runs out, which is the single hardest thing in this industry and the thing that makes a franchise durable.

The operating result is the best in its cohort. A 5.3% trailing operating margin compares with peers at 4.4% for AutoNation, 4.0% for Penske and Lithia, 3.3% for Group 1 and 2.3% for Sonic, all of them cohort peers running the same basic model. Two percentage points of operating margin on a revenue base of $18.0B is not a rounding difference; it is the difference between an operator and an also-ran, and it comes from the mix rather than from a better car.

Management has been converting that into per-share results rather than into empire. The share count has fallen about 4.6% a year over the four years to March 2026, which is a fifth of the company retired in four years. The Q1 FY2026 10-Q shows the same discipline running both ways, describing revenue and gross profit added by "the Herb Chambers Businesses" set against declines from "several dealership divestitures in the second through fourth quarters of 2025 and February 2026". Buying stores in strong markets, selling the weak ones and shrinking the share count is an unglamorous formula. It also happens to be the one that works in a consolidating industry.

Bear Case

The protection around a franchised dealership was never the showroom. It was a legal position: the manufacturer could not sell directly, and somebody had to own the inventory and the warranty relationship. Both halves of that arrangement are being renegotiated, and the terms are set by the counterparty. The FY2025 10-K lists what the manufacturer already controls, running through requirements covering "advertising and marketing practices; • facilities and signs; • products offered to customers; • dealership management; • personnel training; • information systems", and notes that certain events "may give it the right to repurchase its franchises from us". That is not a partnership between equals. It is a licence with conditions attached, and the conditions are written by someone with a direct interest in shortening the distance to the customer.

The erosion shows in the used-car line before it shows anywhere else, because used cars are the part of the business with no franchise protection at all. Carvana, in the same cohort, grew revenue 51.7% year over year at a 9.18% operating margin and a 20.1% gross margin, well above the roughly 16% the franchised peers run. Meanwhile this company's own filing reports that "Same store used vehicle revenue decreased by $185.0 million (4%) due to a $210.9 million (5%) decrease in used vehicle retail revenue", and the Q1 FY2026 10-Q adds that "the decrease in unit volumes on both an all store and same store basis negatively impacted used vehicle revenue". A competitor without stores is taking units while the incumbent holds price. That is what losing a market looks like in its early stage.

The finance office, the other profit centre, has its own squeeze. The Q1 FY2026 10-Q observes that "customers continue to look for ways to manage lower monthly payments" in the current rate environment, which is the polite description of a buyer with less room for an extended warranty and a service contract. The 10-K states the mechanism directly: "rising interest rates may have the effect of simultaneously increasing our capital costs and reducing our revenues". Both ends of the same rate move press on this business, and the compression arrives in the highest-margin line rather than the largest one.

The balance sheet is carrying real weight into that. Net debt stands at about $3.5B, roughly 3.8 times operating profit, on a business whose operating margin is 5.3%. A five-point margin does not have much room in it: a modest deterioration in gross profit per unit, applied across an $18.0B revenue base, moves operating profit by a lot more than it moves revenue. The company is not under pressure today. It is simply positioned so that a normal cyclical downturn in vehicle sales does more damage to the equity than the revenue decline would suggest.

The bull is right that the price already reflects a great deal of this. Every family of valuation method lands above where the shares trade, some of them by a wide margin, and nobody is paying for growth here. The bear case is not that the multiple is too high. It is that the multiple looks cheap against earnings which depend on a distribution arrangement the manufacturers are actively trying to change, and against a used-vehicle business that is losing units to a competitor with a structurally better cost position. Cheap earnings are only cheap if they are still there in five years.

Valuation

Nothing about this price requires a forecast, which is the first thing to establish. At $224.84 in late July 2026, the whole company changes hands at about 8.6 times a year of operating profit, in the lower half of the range its peers carry. Invert that and there is no growth rate to test: the multiple is low enough that the market is paying less than a business shrinking 5% a year would be worth. Treat that as a boundary rather than a forecast. The arithmetic simply runs out of downside to price in.

The methods used to triangulate all point the same way, which is rarer than it sounds. Peer multiples land furthest from the shares, with the price about 54% below where that family reaches. The asset-based methods put the price about 38% below, the cash-flow methods about 36% below, and the earnings-power methods about 26% below. Four families, one direction, no disagreement to resolve. When only one family reaches a price the reader is being asked to believe a single story; here the reader is being asked why four independent frames are all being ignored at once.

The likeliest answer is that the market is pricing the earnings as temporary rather than the multiple as wrong. That is a coherent view. Vehicle gross profit per unit is well above where it sat before the supply shock of the early 2020s, and nobody in the industry claims that is permanent. The relevant test is what happens underneath: the FY2025 10-K shows that in the most recent year "The $123.0 million (4%) increase in gross profit during 2025 was the result of a $121.3 million (9%) increase in parts and service gross profit", which is the least cyclical line in the business doing the work. A company whose growth is coming from service while vehicle margins normalize is behaving the way the bull case would need it to.

Cohort position sharpens rather than softens the point. The trailing operating margin of 5.3% is the highest among the franchised peers, ahead of AutoNation at 4.4%, Lithia and Penske near 4.0% and Sonic at 2.3%. Yet the multiple is in the lower half of the peer range. Being the best operator in a cohort and carrying one of its lower multiples is either an opportunity or a signal that the market disputes the durability of the gap, and the honest position is that the numbers here cannot settle which.

Solvency is the constraint on any of this going wrong slowly. Net debt of roughly $3.5B works out to about 3.8 times operating profit, which is manageable while the service business grows and uncomfortable if vehicle gross profit compresses sharply in a single year. Against that, the share count has fallen about 4.6% a year over the four years to March 2026, so a shareholder's claim on the same operating profit has been rising steadily even while the multiple has not. That is the most concrete thing in this report: the denominator is shrinking on purpose.

Catalysts

The next fixed event is close. Asbury reports second-quarter results before the market opens on July 28, 2026, with a conference call at 10:00 a.m. Eastern. Expectations going in are for a step down: Q2 2026 consensus earnings per share of $6.30, about 15% below the same quarter of 2025. A decline was always likely given where vehicle gross profit per unit has been running, so the informative part of the release is the composition rather than the headline.

Three lines will carry that information. The first is parts and service, which produced essentially all of last year's gross-profit growth and is the closest thing here to a recurring revenue stream. The second is used-vehicle units, where the Q1 FY2026 10-Q already recorded that "the decrease in unit volumes on both an all store and same store basis negatively impacted used vehicle revenue"; another quarter of falling units would make the competitive story harder to dismiss as a pricing choice. The third is finance and insurance, where the company is still transitioning revenue recognition as it rolls out its own product suite, which the same filing notes results in "the deferral of F&I revenue over the TCA contract term as opposed to the immediate recognition of revenue associated with third-party F&I product sales". That transition depresses reported F&I revenue without depressing the economics, and it will keep doing so until the roll-out finishes.

Portfolio activity is the other live thread. The Q1 FY2026 10-Q describes gross profit added by "the Herb Chambers Businesses" against declines from "several dealership divestitures in the second through fourth quarters of 2025 and February 2026", so reported growth and same-store growth will keep diverging for several more quarters. Read the same-store figures. The all-store numbers are a statement about the acquisition calendar, not about the business.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• PAG (Penske Automotive Group, Inc.)
• FY2025 10-K: I, Item 1 for a discussion of our outlook in our markets. Operating Overview Automotive and commercial truck dealerships represent 97.1% of our revenue and 80.9% of our earnings before taxes during 2025. Income from our PTS investment represents 15.3% of our earnings before taxes during 2025. New and used vehicle…
• FY2025 10-K: …terms as us. Automotive dealers also face competition in the sale of new vehicles from purchasing services, and electric vehicle manufacturers that sell directly to consumers. With respect to arranging financing for our customers' vehicle purchases, we compete with a broad range of financial institutions, such as…
• AN (AUTONATION, INC.)
• FY2025 10-K: …vehicle brand, and generally need the manufacturer to approve any relocation or the grant of a new franchise. However, to the extent that a market has multiple dealers of a particular vehicle brand, as most of our key markets do with respect to most vehicle brands we sell, we face significant intra-brand competition.…
• FY2025 10-K: …to expand our footprint and increase scope and scale through both the acquisition of new dealerships and franchises. We face competition from 8 Table of C ontents (i) several public companies that operate numerous automotive retail stores or collision centers on a regional or national basis, including franchised…
• LAD (Lithia Motors, Inc.)
• FY2025 10-K: …provide for prior written notice before a franchise may be terminated under most circumstances. We also sign master framework agreements with most manufacturers that impose additional requirements. See Item 1A. Risk Factors. Competition The retail automotive business is highly competitive. Currently, there are nearly…
• FY2025 10-K: …other unallocated corporate overhead expenses. Internal charges consist of corporate expense allocations which increase segment income for "Corporate and Other" while decreasing segment income for the other operating segments. These internal corporate expense allocations are used to increase comparability of our…
• GPI (Group 1 Automotive, Inc)
• FY2025 10-K: …highest return opportunities. We evaluate all capital uses - including acquisitions, capital expenditures, share repurchases, dividends, debt reduction, real estate investments and organic growth - through a consistent return-based framework. Our acquisition strategy focuses on high-quality dealerships and brands in…
• FY2025 10-K: …as auto brokers, leasing companies and internet companies that provide referrals to, or broker vehicle sales with other dealerships or customers. Our principal new vehicle dealer competitors also have franchise agreements with the various vehicle manufacturers and, as such, generally have access to new vehicles on…
• SAH (SONIC AUTOMOTIVE, INC.)
• FY2025 10-K: …and related businesses. Automotive retailing is a highly competitive business. Our competitors include publicly and privately owned dealerships, some of which are larger and have greater financial and marketing resources than we do. Many of our competitors sell the same or similar makes and models of new and used…
• FY2025 10-K: …In general, these statutes make it unlawful for a manufacturer or distributor to compete with a new motor vehicle dealer in the same brand operating under an agreement or franchise from the manufacturer or distributor in the relevant market area. Certain states, including Florida, Georgia, North Carolina, South…
• RUSHA (RUSH ENTERPRISES, INC.)
• FY2025 10-K: …has become an increasingly competitive factor in the industry. The ability to provide such service requires a significant capital investment in diagnostic and other equipment, parts inventory and highly trained service personnel. EPA and Department of Transportation regulatory guidelines for service processes,…
• FY2025 10-K: …that comply with applicable emissions requirements, labor strikes or similar disruptions (including within their major suppliers), rising raw materials costs, rising employee benefit costs, adverse publicity that may reduce consumer demand for their products (including due to bankruptcy), product defects, vehicle…
• KMX (CARMAX, INC.)
• FY2025 10-K: …risks. BUSINESS RISKS We operate in a highly competitive industry. Failure to develop and execute strategies to remain the nation's largest retailer of used vehicles and to adapt to the increasing use of digital and online tools to market, buy, sell and finance used vehicles could adversely affect our business, sales…
• FY2025 10-K: …of which facilitate increased competition. Based on industry data, there were approximately 38 million used cars sold in the U.S. in calendar 2024, of which approximately 20 million were estimated to be age 0- to 10-year old vehicles. We are the largest retailer of used vehicles in the U.S. In calendar 2024, we…
• CVNA (CARVANA CO.)
• FY2025 10-K: …and further investing in our patented vending machines. Competition With tens of thousands of automotive retailers in the U.S., the used car marketplace is a highly fragmented and highly competitive industry. We believe the primary competitive factors in this market include transparency, convenience, price,…
• FY2025 10-K: …included in Part II, Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K the "Ally MPSA"), and through fixed pool loan sales, with financing partners who generally acquire them at premium prices without recourse to us for their post-sale performance. Factors affecting revenue…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.