Why America's Car-Mart's Shares Took a Dive
Aug 17th 2012 4:09PM
Updated Aug 17th 2012 4:16PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of car dealership operator America's Car-Mart (NAS: CRMT) were sputtering today, losing as much as 17% in intraday trading after the company released results of its fiscal first quarter.
So what: There were indeed some bright points in America's Car-Mart's report, and that likely has a lot to do with why the stock has battled back to a much smaller loss since earlier in the day. Year over year, earnings per share increased by 6.4%, while revenue was up 9.4%. The growth in revenue was driven by a 5.5% increase in same store sales and a 7.8% hike in retail unit sales.
However, the average retail sales price slipped $200, or 2%, from the previous quarter, and contributed to pressure on margins. So, while the $0.83 in EPS that the company reported was up from last year -- thanks to hefty share buybacks -- it was short of the $0.87 that Wall Street analysts were looking for.
Now what: While the recession and post-recession economic sluggishness has been tough on consumers, it's been decidedly better for auto dealerships that focus on value and used cars. Between 2008 and the past 12 months, America's Car-Mart's net income has more than doubled. Thanks to a steady share buyback program, diluted earnings per share are up a whopping 161% over the same period. It's questionable whether that kind of growth will continue but, with shares currently trading at just under 14 times trailing earnings, shareholders aren't paying a huge price for America's Car-Mart shares.
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