Sonic Automotive Inc. Common Stock (SAH)

FairStock Score: 36/100 — MIXED

Key Financials

Strengths

• Generates $190 million in annual free cash flow (8.0% yield on market cap)
• Solid return on equity of 11.1% above cost of capital
• Attractive 2.1% dividend yield providing steady income returns
• Established organization with 11,000 employees providing operational scale

Concerns

• High leverage at 3.96x debt-to-equity increases financial risk and interest expense burden
• Revenue declining at 0.6% year-over-year signals potential demand weakness or market share loss
• Altman Z-Score of 1.4 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Sonic Automotive Inc. Common Stock is a small-cap consumer cyclical company valued at $2.4 billion. The business generates $15.2 billion in annual revenue with a 0.3% net margin and $190 million in free cash flow. From a quality standpoint, Sonic shows solid Piotroski F-Score of 6/9 and distressed Altman Z-Score of 1.4 warrants caution. On valuation, the stock is reasonably priced at 20.8x earnings, with trades above its Graham Number with a negative 43% margin. Growth dynamics show revenue growing at -0.6% and profit growth of -20.0%. The 2.1% dividend yield adds an income component for patient holders. Our composite FairStock Score of 36/100 reflects below-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $190 million in annual free cash flow (8.0% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Elevated leverage at 4.0x 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