AUTONATION, INC. (AN): what the price requires

The current priced-in claim for AUTONATION, INC. (AN) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/AN

Headline

FieldValue
TickerAN
CompanyAUTONATION, INC.
Current price$193.32/sh
CompositionImport 45% / Premium Luxury 55%

What The Price Requires (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin needed1.5%
Operating margin today4.6%
Margin compression implied-3.1pp
Multiple paid7x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration 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 8.4% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.56σ
cohort percentile (of 210 peers)8
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple value, while growth-DCF lands below the price. 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.

FamilyMedian price/FVModelsReads
Asset0.92x5justifies
Earnings0.58x3justifies
Relative0.57x5justifies
Growth2.34x2expensive

Families that justify the price: Asset, Earnings, Relative Families that call it expensive: Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$59.653.24xyesReference only (OCF-based, capex excluded): OCF $0.2B
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$336.700.57xyesP/E 16x (blended: static sector reference 20x + trailing (TTM) 10x), scenarios: 13.5x / 16.0x / 18.5x (bear / base = reference held flat / bull), EV/EBITDA 10.85x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$209.130.92xyesBV/sh $63.44, ROE (TTM) 30.5%, ke 9.3%
Two-Stage Excess ReturnAsset$393.050.49xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$134.091.44xyesRev $27.5B, growth 2% (input: historical growth; tapered), Terminal P/S: 0.2x / 0.2x / 0.3x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$221.280.87xyesEPS $18.44, growth 6% (input: historical EPS growth), PEG=1.54 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$396.430.49xyesNormalized EBIT (5y avg op income, one-time charges added back) $1.63B × (1−21%) / WACC 8.8% → EPV (no growth)
Residual IncomeAsset$319.680.60xyesBV $63.44 + 5yr PV of (ROE (TTM) 30.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$162.241.19xyes√(22.5 × EPS $18.44 × BVPS $63.44) — Graham's conservative floor
EV/EBITDA RelativeRelative$466.720.41xyesEBITDA $1.22B × sector EV/EBITDA 14.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$331.840.58xyesEPS $18.44 × (8.5 + 2×6.5%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$61.413.15xyesBV $63.44 × (ROIC 8.6% / WACC 8.8%)
P/Sales SectorRelative$1174.920.16xyesRevenue $27.49B × sector P/S 1.5x
PEG Fair ValueRelative$179.401.08xyesEPS $18.44 × (PEG 1.5 × growth 6.5% (input: historical EPS growth)) → PE 9.7x
Earnings YieldEarnings$199.350.97xyesEPS $18.44 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$3.7b
Net debt / NOPAT (after-tax)3.79x
Net debt / operating income (pre-tax)2.99x
Interest coverage6.8x
Share count CAGR (buyback)-13.5%
Burning cashno

Bullet Takeaways

Bull Case

The earnings trajectory tells a better story than the revenue line, and the gap between them is the point. Revenue dipped about 2% in the most recent quarter, but reported EPS came in at $5.85, and the engine behind that resilience is the parts-and-service business. Aftersales gross profit hit a first-quarter record of $593 million, up 5%, with the filing attributing same-store gains to "increases in revenue associated with customer-pay service of $111.4 million and warranty service of $86.6 million." Parts and service now provide nearly half of total gross profit, and that matters because repair and maintenance is recurring, high-margin, and far less cyclical than selling cars: the cars already on the road need servicing regardless of whether new-vehicle demand is hot or cold.

The finance and protection layer deepens the moat around each transaction. AutoNation sells service contracts and protection products, including "extended service contracts, maintenance programs, guaranteed auto protection," and increasingly finances customers through its own captive lender. The filing frames the strategy directly, noting that lower third-party finance commissions can be "offset by greater profitability generated by our AutoNation Finance business," where interest income is recognized over the life of each loan. Building a captive finance arm converts a one-time commission into a multi-year interest stream, capturing economics the company previously handed to outside lenders.

Capital allocation is where the bull case turns decisive. The company repurchased $300 million of stock in the quarter, buying 1.5 million shares, part of a program that has reduced shares outstanding by more than 11% year over year. The share count has been falling around 13% a year, which is buyback deployment showing up where it cannot be faked, and at roughly 7 times operating income, every dollar spent retiring shares buys a large slice of earnings power cheaply. A business throwing off durable service-and-finance cash flow, bought back aggressively at a low multiple, compounds per-share value even with flat revenue, which is exactly the combination the recent EPS growth reflects.

Bear Case

The most fragile assumption baked into the story is that new-vehicle demand and pricing hold near recent levels, and that is the one variable AutoNation cannot control. New-car sales move with the affordability math, and the filing is explicit that "the impact interest rates have on customers' borrowing capacity and disposable income" drives demand, since monthly payment is the binding constraint for most buyers. The post-pandemic stretch of elevated vehicle prices and fat per-unit margins is the comparison the recent results are measured against, and a normalization of that pricing, or a demand slowdown from higher-for-longer rates, would compress the front-end of the dealership at the same time it pressures volumes. A roughly 2% revenue decline already hints that the top line is past its peak.

The captive finance arm is the newer risk the dealership model did not historically carry, and it is the most fragile piece in a downturn. AutoNation now originates and services consumer auto loans through its own balance sheet, which means it owns the credit risk, not just a commission. The same filing that touts the finance profitability also warns that decreases in customers' disposable income could "negatively impact their ability to repay loans originated by" the company. In a recession, auto-loan losses rise exactly when vehicle sales and service spending soften, so the captive lender turns a diversification into a correlated bet: the credit losses, the volume decline, and the margin compression all arrive together.

Leverage frames how much room there is for that scenario. Net debt sits near $3.7 billion, about 3 times operating income, with interest coverage around 6.6 times, manageable today but a real claim on cash if earnings soften. The filing flags that higher leverage limits "our flexibility in planning for, or reacting to, changes in our business" and makes the company more vulnerable to downturns. The bear case is not that AutoNation is overvalued; the value methods read the price as cheap. It is that a cyclical retailer at the top of an unusually profitable cycle, adding credit risk through its captive lender and carrying real debt, is one demand-and-credit downturn away from the cheap multiple proving justified rather than opportune.

Valuation

At the current price the market is paying only about 7 times company-wide operating income, a multiple so low that the price sits below what even a 5% annual decline in operating profit would warrant. That is the unusual feature: the market is not asking AutoNation to grow, it is pricing in a mild ongoing deterioration. Against the company's own recent record, the implied pace is well within what it has delivered, so the price is treating a cyclical retailer as if its current earnings are near a peak that fades from here.

The methods we use to triangulate line up clearly, and the alignment defines the read. The asset-value lens, the earnings-power lens, and the peer-multiple lens all support the price or read it as cheap; only the forward-growth method calls it expensive, and it does so precisely because it penalizes a business not expected to grow much. When three of four families say the price is supported and only the growth lens dissents, this is a value-and-asset-supported name, not a growth bet. The price is being defended by what AutoNation earns and owns today, with the growth method's caution simply reflecting that a mature dealership is not a compounder. That is a coherent picture of a cheap cyclical, not a stretched one.

Solvency bounds the downside and is the right place to close. Net debt near $3.7 billion, about 3 times operating income with interest coverage around 6.6 times, is comfortable while the cycle holds but is the amplifier if it turns, since the debt does not flex when vehicle demand softens. The share count falling around 13% a year is the cleanest evidence of where the cash is going: into retiring stock at a low multiple rather than chasing growth. The decisive fact is not a growth rate the price requires, because it requires almost none; it is whether the elevated per-unit profitability of the current auto cycle holds, since the cheap multiple is cheap precisely because the market doubts that it will.

Catalysts

The first-quarter 2026 print showed the model's resilience under a softening top line. Revenue dipped about 2% to $6.6 billion, but reported EPS rose to $5.85, carried by a first-quarter record in aftersales gross profit of $593 million, up 5%, with customer-pay gross profit up 8% and warranty up 7%. Used-vehicle retail units fell 3% to 65,818, but per-unit profitability improved more than $150 sequentially to $1,594, a sign of disciplined inventory and pricing rather than chasing volume.

The steadiest catalyst remains capital return, and the newer one is the captive lender. The company repurchased $300 million of stock in the quarter at an average near $201, part of a program that has cut shares outstanding more than 11% year over year, with about $1.1 billion repurchased since the end of 2024. AutoNation Finance is guided to $2.0 to $2.1 billion of loan originations for 2026, pushing toward 20% penetration of financed units. The watch list follows the bull-bear tension directly: the durability of parts-and-service gross profit, the pace of buybacks against the low multiple, and the credit performance of the growing captive loan book as it scales.

Peer Cohorts (Per Segment, With Filing Citations)

Import (reported)

Premium Luxury (reported)

AutoNation Finance (reported)

Methodology Note

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.

Sources

AutoNation Q1 2026 results, 8-K · AutoNation Q1 2026 earnings call, May 2026

View the full interactive AN report on boothcheck