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Making a U turn and watching the stock go low in its price is intimidating for investors who own the shares of the stock. Some like to wait and watch the ripple vanish and others simply sell it away as soon as the stone touches the river. However, there are few who actually analyse the entire situation and then make the informed decision. Let us discuss about the Autocanada Stock Analysis which has been in talks these days.

About the Company

AutoCanada Inc. dates back to 2009 with its headquartered in Edmonton, Canada. Autocanada Inc is a franchised automobile dealer operating through its subsidiaries in Saskatchewan, Alberta, British Columbia, Nova Scotia, Manitoba, Ontario, New Brunswick and Quebec.

The company not only offers vehicle parts and new and used vehicles but also provide services which include vehicle leasing, extended service contracts, vehicle maintenance and collision repair services and various other after-market products.

Autocanada Stock Analysis helps its customers in arranging financing and insurance for vehicle purchases which is done through the third-party insurance companies. In around a decade, the company has managed to acquire 54 automotive dealerships and 62 franchises in 8 different provinces.

Autocanada – Key Ratios

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To further analyse the stock, it is vital to check the key ratios that decide the future of the stock. And, as per the chart above, the indications are a bit confusing. You can very well make out the ones that are in favour of the stock and the ones that are working against its profitability.

Good Signals: If you closely look at the different values in front of the tax ratio, you will find that it has a tendency of decreasing tax rate amount. This is a great signal for any stock trying to become the future stock. Moreover, the increasing Net and EBT Margins, decreasing asset turnover average, increasing return on assets, surging return on equity and inflated interest coverage ratios are working in favour of this stock.

Bad Signals: Apart from all the good signals, the stock is not found for the profitability measure. However, the question is: Will that alone cause this stock to fall for worse?

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Growth of the Company

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A company’s growth analysis plays a key role in deciding whether the particular stock will have its say in the coming years. Even if the profitability seems uninteresting, the growth tendency referenced from the historical data and the one forecasted by the analysts changes the entire plan. In the above graph (Source: Morningstar) the declining time revenues and operating income growth rates may be horrifying. But, the increasing net profit compensates for all these variations.

Other Decisive Ratios

Cash Flow Ratio:

The chart again taken from Morningstar calls for the positive side. Cash Flow gets you the insight of the company’s internal accounting. Using the

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accounting standards, companies come up with the reports on the incomes and expenses. Hence, Cash-Flow Statement and ratios should not be ignored while analysing the stock performance.

According to the above chart, growing operating cash-flows, increasing Capital Expenditures and surging Free Cash Flow/Sales % over time indicates a bright future ahead.

Liquidity/Financial Health Ratio:

Now, let us check out if the company is willing to meet their financial commitments, liquidity and risks. As per the measures, the company is able to maintain current and quick ratios above 1. This is a good indication, as the company is able to meet their short term financial obligations. Moreover, the decreasing financial leverage and debt to equity Ratios shows that the company is reducing risks.

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Efficiency Ratios:

What does this efficiency curve illustrate? The Cash Conversion Cycle has surged with time due to the increase of Days in Inventory. However, at the same time, there is a decrease in the Days of Sales Outstanding and Payables Period. To improve this ratio, the company must increase the sales quantity and improve their quality using better marketing tactics and strategies.

On a brighter side, they have decreasing turnover ratios which signals the improving operating efficiency.

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Valuation Ratios:

The valuation ratio of the company equals the industry average. However, its price to book ratio is lower than 1 P/E and Price to Cash-Flow lower is lower than 8. This signifies that the company is undervalued. So, you may think of acquiring the shares of this stock before it goes beyond the 9.5 P/E ratio. And, if you already own it, be patient and hold it for some time longer.

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What makes it a good investing for future is its tendency toward Stock Price increase relative to its Earnings, Book Value and Cash-Flows.

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The Ratings from Analysts

As per the Morningstar analysts, there is an undisputed consensus for buying and holding this stock. One of the analyst even thinks that it would outperform their industry peers in the long run.

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Quick Revision:

Strengths

  • Considering the daily data, the stock prices are approaching a good support phase which will offer right timing for investors.
  • Its low valuation is an indication that it is the right time for investing in this stock.
  • Analysts backs the idea of purchasing this stock and even holding for long.
  • The forecasted price for the future of this stock is much higher than the current price and offers an incredible appreciation potential.

Weaknesses

  • Financial statements are something that have not been in favour of this company.
  • Revenue estimates are being swotted and changed downhill for current as well as the coming years.
  • Low underlying tendency for the weekly chart (Less than the resistance of 20.23CAD)

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