To invest in this $11b market cap company you have to believe that the $479m in net earnings they made last quarter is very likely to bounce back closer to the $888m they made in pre-COVID 2020 and not drag on for too long, taking their P/E back from 23 to 12.

In their fiscal years ending in February 2019 and 2020 they were able to earn $842M and $888M respectively. Rates were only about 100bps lower back then than they are right now. High interest rate environments are typically good for used cars/equipment because they have traditionally been more affordable compared to like new options.

The current challenge is the price run ups on all goods has caused used cars to be rather unaffordable for many consumers. The market will heal itself but it’s going to take some pain in the rationalization of prices both for the holders of the used inventory and buyers. These things take time. I think it’s pretty likely they can get back to ~3500 new units per store in the next 12-18mo. If they can do that then they should net $3-3.5M per store easily and get them back to the $800M+ level.

I would love to see another positive comp number this quarter to signal they are on the way.

Jeff