CarMax vs Sonic Automotive Which Is a Better Investment?

CarMax and Sonic Automotive are both companies in the automotive retail industry, but they have different business models and market strategies. CarMax is known for its large network of used car dealerships and streamlined sales process, while Sonic Automotive operates a network of new car dealerships under various brands. Both companies have seen fluctuations in their stock values in recent years, with CarMax generally outperforming Sonic Automotive due to its strong brand recognition and customer loyalty. Investors should carefully analyze the financial performance and growth prospects of each company before making investment decisions.

CarMax or Sonic Automotive?

When comparing CarMax and Sonic Automotive, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between CarMax and Sonic Automotive.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. CarMax has a dividend yield of -%, while Sonic Automotive has a dividend yield of 2.25%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. CarMax reports a 5-year dividend growth of 0.00% year and a payout ratio of 0.00%. On the other hand, Sonic Automotive reports a 5-year dividend growth of 37.04% year and a payout ratio of 20.60%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with CarMax P/E ratio at 28.66 and Sonic Automotive's P/E ratio at 11.54. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. CarMax P/B ratio is 1.94 while Sonic Automotive's P/B ratio is 2.23.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, CarMax has seen a 5-year revenue growth of 0.99%, while Sonic Automotive's is 0.76%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with CarMax's ROE at 6.83% and Sonic Automotive's ROE at 20.88%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $75.63 for CarMax and $65.12 for Sonic Automotive. Over the past year, CarMax's prices ranged from $62.45 to $88.22, with a yearly change of 41.27%. Sonic Automotive's prices fluctuated between $47.82 and $66.53, with a yearly change of 39.13%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.