Can AutoCanada Continue to Rise in the Face of Headwinds?

AutoCanada (TSX:ACQ) operates car dealerships across Canada. The company underwent an internal review last year after posting successive disappointing earnings. Shares have climbed 1.8% in 2019 as of close on July 5.

Canadian auto sales posted their 16th-straight sales decline in the month of June. Sales fell 7.2% from the prior year. DesRosiers Automotive Consultants said the results were in line with expectations.

A correction was expected after consecutive record years. Even still, sales remain high compared to historical levels. Interestingly, auto sales in the U.S. have enjoyed a nice bounce back year and are up 2% from 2018.

In the first quarter of 2019, AutoCanada saw revenues rise 19% year-over-year to $739.4 million. New vehicle retail sales were up 20% and used vehicle sales were up 24% from the prior year. AutoCanada’s new unit sales outperformed the broader market. The company’s Go Forward Plan appears to be paying off so far.

Shares are still down 29% from the same period in 2018. The stock boasts a favourable price-to-earnings ratio of 5. Shares had an RSI of 49 as of close on July 5, which puts the stock in neutral territory.

AutoCanada currently offers a quarterly dividend of $0.10 per share, which represents a solid 3.5% yield at the time of this writing.

When we consider the headwinds in this sector, AutoCanada just does not offer the kind of value I want to see to pull the trigger in July.

However, solid early results make it worth monitoring in the second half of 2019.