Lithia Motors Inc. Common Stock (LAD)

FairStock Score: 58/100 — STEADY

Key Financials

Strengths

• Generates $774 million in annual free cash flow (12.0% yield on market cap)
• Solid return on equity of 12.4% above cost of capital
• Established organization with 30,000 employees providing operational scale

Concerns

• High leverage at 2.35x debt-to-equity increases financial risk and interest expense burden
• Weak Piotroski F-Score of 3/9 suggests deteriorating financial quality across multiple dimensions
• Altman Z-Score of 1.0 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Lithia Motors Inc. Common Stock is a small-cap consumer cyclical company valued at $6.5 billion. The business generates $37.6 billion in annual revenue with a 0.4% net margin and $774 million in free cash flow. From a quality standpoint, Lithia shows weak Piotroski F-Score of 3/9 signaling deteriorating fundamentals and distressed Altman Z-Score of 1.0 warrants caution. On valuation, the stock is deeply undervalued on a P/E basis at 8.6x, with offers a 39% margin of safety vs Graham Number of $452. Growth dynamics show revenue growing at 0.3% and profit growth of -36.7%. Our composite FairStock Score of 58/100 reflects mixed fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

The market underappreciates Lithia's consistent 12% ROE at just 9x earnings—a re-rating toward sector peers could unlock 30-50% upside. With $774 million in annual free cash flow (12.0% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Elevated leverage at 2.4x D/E means rising interest rates or revenue weakness could strain debt covenants and force asset sales at distressed prices. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer