SONIC AUTOMOTIVE, INC. (SAH): what the price assumes

boothcheck covers SONIC AUTOMOTIVE, INC. (SAH) 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 2026-08-08.

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

Headline

FieldValue
TickerSAH
CompanySONIC AUTOMOTIVE, INC.
Sector / IndustryConsumer Cyclical
Current price$86.78/sh
CompositionFranchised Dealerships Segment 85% / EchoPark Segment 14% / Powersports Segment 1%

What The Price Assumes (Inversion)

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

FieldValue
Inversion basiswhole-company
Operating margin (value-band context)1.9%
Operating margin today3.3%
Margin compression (value-band)-1.4pp
Multiple paid10x operating income

The operating-margin figure is value-band context at year 12: 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% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6% sits below it).

Reconcile: at the x-ray's 9.3% required return this reads ~-3.7%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.43σ
cohort percentile (of 214 peers)18
implied end-window share0%

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.

FamilyMedian price/FVModelsReads
Asset1.22x5expensive
Earnings0.88x3justifies
Relative0.38x2justifies
Growth0.98x2justifies

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=12)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$131.480.66xyesReference 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——noP/E 20x (static sector reference · 2026-04), scenarios: 16.7x / 20.0x / 23.3x (bear / base = reference held flat / bull), EV/EBITDA 14x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$71.361.22xyesBV/sh $31.95, ROE (TTM) 20.7%, ke 9.3%
Two-Stage Excess ReturnAsset$105.710.82xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$67.121.29xyesRev $15.5B, growth 5% (input: historical growth; tapered), Terminal P/S: 0.2x / 0.2x / 0.2x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$220.500.39xyesEPS $6.30, growth 35% (input: historical EPS growth), PEG=0.38 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$98.850.88xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.51B × (1−29%) / WACC 6.7% → EPV (no growth)
Residual IncomeAsset$101.270.86xyesBV $31.95 + 5yr PV of (ROE (TTM) 20.7% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$67.301.29xyes√(22.5 × EPS $6.30 × BVPS $31.95) — Graham's conservative floor
EV/EBITDA RelativeRelative——noEBITDA $0.67B × sector EV/EBITDA 14.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$203.280.43xyesEPS $6.30 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$13.806.29xyesBV $31.95 × (ROIC 2.9% / WACC 6.7%)
P/Sales SectorRelative——noRevenue $15.47B × sector P/S 1.5x
PEG Fair ValueRelative$236.250.37xyesEPS $6.30 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$68.111.27xyesEPS $6.30 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
Franchised Dealershipsoperatingenterprise$12.9b$316.1m operating-incomewithheldunresolved no unit value
EchoParkoperatingenterprise$2.1b$28.1m operating-incomewithheldunresolved no unit value
Powersportsoperatingenterprise$202.9m$2.3m operating-incomewithheldunresolved no unit value

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

FieldValue
Net debt$2.1b
Net debt / NOPAT (after-tax)5.85x
Net debt / operating income (pre-tax)4.18x
Share count CAGR (buyback)-5.6%
Burning cashno

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

Bullet Takeaways

Bull Case

Revenue is the least informative number a franchised dealer group publishes. Sonic moved 15.5 billion dollars of it in the twelve months ended June 30, 2026 and kept roughly 510 million at the operating line, a margin of 3.3%. Read that as a commodity retailer and you would be reading the wrong business. Most of the top line is metal sold at a few points of markup, priced by the manufacturer and by the dealer down the road. The profit lives somewhere quieter. The FY2025 annual report describes the parts and service operation growing faster than the revenue feeding it: "Reported Fixed Operations revenue increased 12% and Fixed Operations gross profit increased 15% in 2025, driven primarily by higher repair order volume as a result of acquisitions."

Service work is the closest thing a car dealer has to a subscription. A vehicle sold today comes back for maintenance for years, under warranty first and on the owner's own money afterward, and the selling dealership is the default place it goes. The March 2026 quarter showed the mechanism running without acquisitions doing the work: "Same store Fixed Operations gross profit increased 5% during the three months ended March 31, 2026". Underneath that, customer pay revenue rose about 6% with gross profit on it up about 5%, and warranty revenue rose about 6% with gross profit up 7%. Fixed Operations gross margin ran 48% in the quarter. Nothing else in the building earns anywhere near that.

Brand mix compounds the effect, and the company is direct about which franchises it wants. Its annual report favors "luxury and mid-line import dealerships, which typically have higher operating margins, more stable Fixed Operations departments, lower associate turnover and lower inventory levels than other brand categories". Lower inventory pays twice, once in the margin and once in what it costs to carry. Finance and insurance is the other attachment sold at almost no incremental cost, and finance contract revenue on combined retail new and used vehicles rose 1% in the March 2026 quarter on a 280 basis point increase in penetration.

Capital allocation has turned aggressive for a company this size. Repurchases ran 142.0 million dollars in the first half of 2026 against 44.1 million in the same half of 2025, with 25.3 million dollars of dividends paid alongside. Diluted shares fell to 32.1 million in the June 2026 quarter from 34.1 million a year earlier. Retiring almost 6% of the count inside a year is not something management does absent-mindedly, and it lands in per-share earnings whether or not the stores sell another car.

One last thing the balance sheet gets wrong at a glance. Vehicle inventory is funded on floor plan lines that exist for that single purpose, and the borrowing rises and falls with the cars sitting on the lot. Sonic also holds money in floor plan deposit accounts that net against it: "The floor plan deposit balance was $300.0 million as of December 31, 2025 and $340.0 million as of December 31, 2024." Inventory funding is a working-capital line, not a claim on the equity in the ordinary sense. The borrowings that do behave like corporate obligations are a separate and much smaller figure.

Bear Case

Rates work on this business from both ends, and only one end shows up in the financial statements. The visible end is inventory funding: vehicles and parts on the books came to 2,324.5 million dollars on June 30, 2026, carried on lines whose rates float with one-month Term SOFR or the prime rate. The other end is the customer, who does not really buy a car. They buy a monthly payment. When the rate on that payment rises, the unit still sells, but it sells with a thinner gross, or it waits.

The compression is already in the per-unit figures. Retail new vehicle gross profit per unit fell $133, or 4%, to $3,002 in the March 2026 quarter, and new vehicle inventory days' supply moved to about 58 days from 51 a year earlier. Neither number is dramatic alone. Both point the same way, toward the arrangement in which a dealer's new vehicle department earns very little and the service drive carries the company.

The structural issue underneath is who controls the economics. A dealer group owns the stores but not the terms. Sonic's 10-K is unusually plain about it: "Our dealerships depend on the manufacturers for certain sales incentives or employee pricing promotions, vehicle warranties, customer rebates, new and used vehicle financing or leasing incentives, dealer incentives on new vehicles". The same document explains what compliance costs, warning that mandated facility and brand standards "may put us in a competitive disadvantage with other competing dealerships and may ultimately result in our decision to sell a franchise when we believe it may be difficult to recover the cost of the required investment".

What that dependency costs is not theoretical. Impairment charges ran about 173.8 million dollars in 2025 against 3.9 million in 2024, and roughly 173.1 million of the 2025 amount was franchise asset impairment, about 165.9 million of it inside the Franchised Dealerships Segment. Those are the rights to sell particular brands, marked down because they were carried above what they earn. The charge landed in the June 2025 quarter, which printed an operating loss of 23.3 million dollars. That quarter has since rolled out of the trailing window. Operating profit for the twelve months ended June 30, 2026 reads about 510 million dollars, while calendar 2025 read 367.5 million. Same company, different window.

EchoPark is the segment the capital budget has already answered. The standalone used vehicle format brings in roughly 2.1 billion dollars of revenue, about 14% of the total, and it runs no repair bays: the annual report notes it "does not offer customer-facing Fixed Operations services". Of roughly 149.9 million dollars of capital projects in 2025, about 145.8 million went to the franchised stores and about 1.2 million to EchoPark. A format can be run for cash on that budget. It cannot be grown on it.

None of this is an argument that the shares are dear. The price asks for an operating margin near 1.9% held over roughly a decade, against the 3.3% the trailing year delivered, which is a soft requirement by any standard. That is the bear case, not a rebuttal to it. The discount is the market pricing a cycle rather than misreading an income statement, and in a cyclical the easy requirement stays easy right until the quarter it does not. Borrowings outside the inventory lines run 4.18 times operating profit, cash on hand was 19.2 million dollars on June 30, 2026, and about 200 million dollars of interest and other charges sat below the operating line in the trailing year. Three cents of operating profit on the sales dollar is not much room.

Valuation

The market is paying about 10.3 times operating profit here, measured against the roughly 510 million dollars Sonic earned at that line in the twelve months ended June 30, 2026. Ten times is undemanding for almost any business. In this case it is doing something more specific than that: the shares sit below what the company would be worth if operating profit shrank 5% a year from here. Growth is not among the things being paid for.

Run the same question through the margin and the requirement gets concrete. Holding an operating margin near 1.9% for roughly a decade supports the current quote. The trailing year produced 3.3%. Sonic would have to hand back more than a third of the profitability it just showed before the arithmetic stops holding, and the profitability it just showed is itself a thin-margin business by any normal standard.

The methods used to triangulate this mostly agree, which is not how it usually goes. Peer multiples land well above the shares. So do the earnings-power methods, including the most conservative one available: take five years of average operating profit, tax it, capitalize it at the cost of capital, assume no growth at all, and the result still clears the quote. Only the asset-value lens sits under the shares, and the price runs about 22% above that family's central estimate. Book value, no-growth earnings and peer multiples all reaching the same conclusion is a value read.

Cohort position explains part of the discount and complicates the rest. On trailing filed figures ABG earned a 4.35% operating margin, AN 4.81%, PAG 3.86% and LAD 4.08%, and only GPI at 3.13% sits below Sonic's 3.3%. Scale accounts for some of the gap, since LAD runs 37.9 billion dollars of revenue and PAG 32.2 billion against Sonic's 15.5 billion, and overhead in this industry spreads across stores. The rest is brand mix and the share of profit coming from the service side.

The inputs beneath all of this are ordinary and checkable. Diluted shares were 32.1 million in the June 2026 quarter. Capital spending is disclosed by segment: "Capital expenditures for 2025 were approximately $149.9 million, including approximately $145.8 million related to our Franchised Dealerships Segment, approximately $1.2 million related to our EchoPark Segment". Revenue divides roughly 12.9 billion dollars through the franchised dealerships, 2.1 billion through EchoPark and about 203 million through powersports. Interest and other charges below the operating line came to roughly 200 million dollars in the trailing year, which is under two fifths of the operating profit sitting above them, and the business was not consuming cash.

Inventory discipline is the variable that keeps the funding side honest, and management states the target: "We generally focus on maintaining used vehicle inventory days’ supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility." Held inside that band, the inventory borrowings unwind as the cars sell. Held outside it, they are a fixed charge against a variable gross.

Catalysts

The June 2026 quarter is the freshest read. Gross profit came to 616.2 million dollars and operating profit to 131.6 million, with net income of 57.4 million and diluted earnings of $1.79 a share. That puts first-half operating profit at 264.3 million dollars against 121.6 million a year earlier, though the 2025 comparison carries the franchise write-down and flatters the change.

Capital return is the live development. Repurchases ran about 135.7 million dollars in the March 2026 quarter alone and 142.0 million across the first half, against 82.4 million for all of 2025. Diluted shares fell to 32.1 million in the June quarter from 34.1 million a year before. The count is now moving faster than any operating line in the business.

On the funding side, the March 2026 quarter introduced a Bridge Facility alongside the existing Mortgage and Sidecar facilities, prepayable without premium or penalty in amounts above $0.5 million. Mortgage notes outside those facilities carried a weighted-average rate of 4.40% on a combined principal balance of 14.9 million dollars. The next print is where the two forces meet: same-store service growth on one side, gross profit per vehicle on the other.

Peer Cohorts (Per Segment, With Filing Citations)

Franchised Dealerships (reported)

EchoPark (reported)

Powersports (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

Q2 FY2026 Form 10-Q · Q2 FY2026 and Q2 FY2025 Forms 10-Q · Q1 and Q2 FY2026 Forms 10-Q; FY2025 Form 10-K · Q1 FY2026 Form 10-Q

View the full interactive SAH report on boothcheck