Analyzing AutoCanada (OTCMKTS:AOCIF) and Lithia Motors (NYSE:LAD)

AutoCanada (OTCMKTS:AOCIF) and Lithia Motors (NYSE:LAD) are both consumer cyclical companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, institutional ownership, valuation, earnings, analyst recommendations, dividends and profitability.

Insider and Institutional Ownership

44.8% of AutoCanada shares are held by institutional investors. 1.8% of Lithia Motors shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares AutoCanada and Lithia Motors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AutoCanada	N/A	N/A	N/A
Lithia Motors	2.52%	13.84%	4.16%

Dividends

AutoCanada pays an annual dividend of $1.11 per share and has a dividend yield of 9.4%. Lithia Motors pays an annual dividend of $2.12 per share and has a dividend yield of 0.7%. AutoCanada pays out 51.2% of its earnings in the form of a dividend. Lithia Motors pays out 6.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lithia Motors has raised its dividend for 15 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and target prices for AutoCanada and Lithia Motors, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AutoCanada	0	0	0	0	N/A
Lithia Motors	0	4	6	0	2.60

Lithia Motors has a consensus target price of $338.00, suggesting a potential upside of 5.35%. Given Lithia Motors’ higher probable upside, analysts plainly believe Lithia Motors is more favorable than AutoCanada.

Earnings and Valuation

This table compares AutoCanada and Lithia Motors”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AutoCanada	N/A	N/A	N/A	$2.17	5.47
Lithia Motors	$33.74 billion	0.26	$1.00 billion	$33.87	9.47

Lithia Motors has higher revenue and earnings than AutoCanada. AutoCanada is trading at a lower price-to-earnings ratio than Lithia Motors, indicating that it is currently the more affordable of the two stocks.

Summary

Lithia Motors beats AutoCanada on 11 of the 13 factors compared between the two stocks.

About AutoCanada

AutoCanada Inc., through its subsidiaries, operates franchised automobile dealerships and related business. The company offers a range of automotive products and services, including new and used vehicles, vehicle leasing, vehicle parts, vehicle maintenance and collision repair services, and extended service contracts; and vehicle protection, after-market products, and auction services. It also arranges financing and insurance for vehicle purchases by its customers through third-party finance and insurance sources. The company sells its vehicles under the Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Audi, Volkswagen, Mazda, Mercedes-Benz, BMW, MINI, Ford, Acura, Honda, Kia, and Porsche brands. It operates franchised dealerships in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, and New Brunswick in Canada, as well as in Illinois, the United States. The company also offers used vehicles online. AutoCanada Inc. was incorporated in 2009 and is based in Edmonton, Canada.

About Lithia Motors

Lithia Motors, Inc. operates as an automotive retailer worldwide. It operates in two segments, Vehicle Operations and Financing Operations. The company’s Vehicle Operations segment sells new and used vehicles; provides parts, repair, and maintenance services; vehicle finance; and insurance products. Its Financing Operations segment provides financing to customers buying and leasing retail vehicles. The company sells its products and services through the Driveway and Greencars brand names through a network of locations, e-commerce platforms, and captive finance solutions. Lithia Motors, Inc. was founded in 1946 and is headquartered in Medford, Oregon.