Between 2015-19 ABG was valued at 7.3x trailing income on an EV/EBITDA basis, 10.1x on a P/E basis, and 15.2x using EV/FCF.  Valuation multiples for the Dealer began to normalize in 2024 as performance reflected a slowdown in the rate of decline of variable gross performance. When the tariff crises is resolved, we believe the group multiple will expand. Our estimates do not include the impact from the Herb Chambers transaction. Our $236 price target uses the low end of our multiple range and averages all three metrics.

The auto industry is capital-intensive, labor-intensive, cyclical, low-growth, competitive, and highly regulated.  While industry characteristics limit competitive threats, each presents ad added financial risk. Industry demand in the major global markets depends on current economic conditions, which can change unexpectedly and could have a material impact on our earnings assumptions. The high relative fix cost structure of the industry can lead to material changes in pricing for new and used vehicles as well as components. A material decline in the price structure of the industry could have a material impact on our financial assumptions. During periods of severe industry recession in the past, many companies in the auto sector were forced to seek bankruptcy protection. Changing industry sales and the performance of the overall economy can have a significant impact on Asbury’s financial performance and our price target for the stock.