Should You Consider This Auto Stock in October?

AutoCanada (TSX:ACQ) plunged to a 52-week low in September on the back of a prolonged slump for auto sales in Canada. August auto sales fell 0.1% in Canada, marking the 18th consecutive month of losses in the industry.

Still, auto sales remain at historically high levels. Global Automakers of Canada (GAC) president David Adams blamed part of the slump on low consumer confidence.

Shares of AutoCanada have dropped 26% in 2019 so far. Slumping sales have cast a shadow over the industry which has had a negative impact on the stock. This is unfortunate, as AutoCanada has managed to put together solid results in the face of headwinds. In the second quarter it reported gross profit of $153.4 million which was up 9.1% from Q2 2018.

Total vehicles sold rose 4.3% year-over-year to 19,353.

The company has outperformed the broader industry in 2019 so far. New retail unit sales fell 1.4% in the second quarter compared to a 7.8% decrease for the wider Canadian vehicle market, according to DesRosiers Automotive Consultants. Used retail units powered sales growth as they rose 24.5% year over year.

Consumer confidence will likely remain muted into late 2019 as economic uncertainties weigh on Canadians. A softening rate environment may underpin the auto market, but a rebound in 2020 may be a tall order. AutoCanada stock had an RSI of 34 as of close on September 26, putting it just outside of technically oversold territory.

The stock also has a favourable P/E ratio of 5.4 and a P/B of 0.5. Still, the state of the auto market is keeping me away from buying low right now.