Reviewing CarMax (KMX) & Asbury Automotive Group (ABG)

CarMax (NYSE: KMX) and Asbury Automotive Group (NYSE:ABG) are both retail/wholesale companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, dividends, earnings, valuation, risk, analyst recommendations and institutional ownership.

Profitability

This table compares CarMax and Asbury Automotive Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CarMax 3.88% 21.09% 4.02%
Asbury Automotive Group 2.23% 38.22% 6.02%

Insider & Institutional Ownership

98.4% of CarMax shares are owned by institutional investors. 2.0% of CarMax shares are owned by insiders. Comparatively, 1.9% of Asbury Automotive Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and target prices for CarMax and Asbury Automotive Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CarMax 0 5 13 0 2.72
Asbury Automotive Group 1 3 1 0 2.00

CarMax presently has a consensus price target of $78.50, indicating a potential upside of 18.90%. Asbury Automotive Group has a consensus price target of $65.20, indicating a potential downside of 5.30%. Given CarMax’s stronger consensus rating and higher possible upside, equities research analysts clearly believe CarMax is more favorable than Asbury Automotive Group.

Volatility and Risk

CarMax has a beta of 1.53, suggesting that its stock price is 53% more volatile than the S&P 500. Comparatively, Asbury Automotive Group has a beta of 1.54, suggesting that its stock price is 54% more volatile than the S&P 500.

Valuation & Earnings

This table compares CarMax and Asbury Automotive Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CarMax $17.12 billion 0.69 $664.11 million $3.70 17.84
Asbury Automotive Group $6.46 billion 0.22 $139.10 million $6.43 10.71

CarMax has higher revenue and earnings than Asbury Automotive Group. Asbury Automotive Group is trading at a lower price-to-earnings ratio than CarMax, indicating that it is currently the more affordable of the two stocks.

Summary

CarMax beats Asbury Automotive Group on 10 of the 14 factors compared between the two stocks.

CarMax Company Profile

CarMax Inc., through its subsidiaries, operates as a retailer of used vehicles in the United States. The company operates in two segments, CarMax Sales Operations and CarMax Auto Finance. It offers customers a range of makes and models of used vehicles, including domestic and imported vehicles; sells vehicles that do not meet its retail standards to licensed dealers through on-site wholesale auctions; and provides extended protection plans to customers at the time of sale. The company also offers reconditioning and vehicle repair services; and provides financing alternatives for retail customers across a range of credit spectrum through its CarMax Auto Finance and arrangements with various financial institutions. In addition, it sells new vehicles under franchise agreements. As of December 21, 2017, the company operated 185 used car stores in 39 states. CarMax Inc. was founded in 1993 and is based in Richmond, Virginia.

Asbury Automotive Group Company Profile

Asbury Automotive Group, Inc. operates as an automotive retailer in the United States. It offers a range of automotive products and services, including new and used vehicles; and vehicle repair and maintenance, replacement parts, and collision repair services. The company also provides finance and insurance products, including arranging vehicle financing through third parties; and aftermarket products, such as extended service contracts, guaranteed asset protection insurance, prepaid maintenance, and credit life and disability insurance. As of February 06, 2018 the company owned and operated 95 new vehicle franchises representing 29 brands of automobiles at 81 dealership locations, and 24 collision centers in the United States. Asbury Automotive Group, Inc. was founded in 1995 and is headquartered in Duluth, Georgia.

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