Sonic Automotive vs CarMax Which Is More Profitable?

Sonic Automotive and CarMax are two of the biggest players in the automotive industry, with both companies offering a wide range of services including car sales, financing, and maintenance. While both stocks have shown positive growth over the years, there are key differences between them that investors should consider. Sonic Automotive focuses on selling new and pre-owned vehicles through its network of dealerships, while CarMax is known for its no-haggle pricing and extensive selection of used cars. Understanding the strengths and weaknesses of each company can help investors make informed decisions about where to place their bets in the competitive automotive market.

Sonic Automotive or CarMax?

When comparing Sonic Automotive and CarMax, 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 Sonic Automotive and CarMax.

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. Sonic Automotive has a dividend yield of 2.25%, while CarMax has a dividend yield of -%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Sonic Automotive reports a 5-year dividend growth of 37.04% year and a payout ratio of 20.60%. On the other hand, CarMax reports a 5-year dividend growth of 0.00% year and a payout ratio of 0.00%.

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 Sonic Automotive P/E ratio at 11.54 and CarMax's P/E ratio at 28.66. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Sonic Automotive P/B ratio is 2.23 while CarMax's P/B ratio is 1.94.

Growth Investors:

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

Retail Investors:

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