Comparing Lithia Motors (NYSE:LAD) & Advance Auto Parts (NYSE:AAP)
by Sarita Garza · The Markets DailyAdvance Auto Parts (NYSE:AAP – Get Free Report) and Lithia Motors (NYSE:LAD – Get Free Report) are both mid-cap consumer discretionary companies, but which is the better business? We will compare the two companies based on the strength of their dividends, analyst recommendations, risk, profitability, institutional ownership, valuation and earnings.
Analyst Recommendations
This is a breakdown of current recommendations for Advance Auto Parts and Lithia Motors, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Advance Auto Parts | 2 | 16 | 2 | 0 | 2.00 |
| Lithia Motors | 0 | 6 | 6 | 0 | 2.50 |
Advance Auto Parts presently has a consensus price target of $48.94, suggesting a potential upside of 6.08%. Lithia Motors has a consensus price target of $402.10, suggesting a potential upside of 39.54%. Given Lithia Motors’ stronger consensus rating and higher probable upside, analysts clearly believe Lithia Motors is more favorable than Advance Auto Parts.
Dividends
Advance Auto Parts pays an annual dividend of $1.00 per share and has a dividend yield of 2.2%. Lithia Motors pays an annual dividend of $2.80 per share and has a dividend yield of 1.0%. Advance Auto Parts pays out 73.0% of its earnings in the form of a dividend. Lithia Motors pays out 9.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Advance Auto Parts has raised its dividend for 1 consecutive years and Lithia Motors has raised its dividend for 16 consecutive years.
Valuation and Earnings
This table compares Advance Auto Parts and Lithia Motors”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Advance Auto Parts | $8.62 billion | 0.32 | $44.00 million | $1.37 | 33.67 |
| Lithia Motors | $37.63 billion | 0.17 | $819.60 million | $30.15 | 9.56 |
Lithia Motors has higher revenue and earnings than Advance Auto Parts. Lithia Motors is trading at a lower price-to-earnings ratio than Advance Auto Parts, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Advance Auto Parts and Lithia Motors’ net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Advance Auto Parts | 0.97% | 9.84% | 1.83% |
| Lithia Motors | 1.88% | 12.16% | 3.14% |
Volatility & Risk
Advance Auto Parts has a beta of 1.07, meaning that its share price is 7% more volatile than the S&P 500. Comparatively, Lithia Motors has a beta of 1.27, meaning that its share price is 27% more volatile than the S&P 500.
Insider & Institutional Ownership
88.7% of Advance Auto Parts shares are held by institutional investors. 0.8% of Advance Auto Parts shares are held by company insiders. Comparatively, 1.1% of Lithia Motors shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Summary
Lithia Motors beats Advance Auto Parts on 13 of the 17 factors compared between the two stocks.
About Advance Auto Parts
Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts; exhaust systems and parts; hub assemblies; ignition components and wires; radiators and cooling parts; starters and alternators; and steering and alignment parts. It also offers air conditioning chemicals and accessories; air fresheners; antifreeze and washer fluids; electrical wires and fuses; electronics; floor mats, seat covers, and interior accessories; hand and specialty tools; lighting products; performance parts; sealants, adhesives, and compounds; tire repair accessories; vent shades, mirrors and exterior accessories; washes, waxes and cleaning supplies; and wiper blades. In addition, the company offers air filters; fuel and oil additives; fuel filters; grease and lubricants; motor oils; oil filters, part cleaners and treatments; and transmission fluids for engine maintenance. Further, it offers battery and wiper installation; engine light scanning and checking; electrical system testing, including batteries, starters, and alternators; oil and battery recycling; and loaner tool program services. Additionally, the company sells its products through its website. It serves professional installers and do-it-yourself customers. The company operates stores under the Advance Auto Parts and Carquest names, as well as branches under the Worldpac name. The company has stores in the United States, Puerto Rico, the U.S. Virgin Islands, and Canada; and independently owned Carquest branded stores in Mexico and various Caribbean Islands. Advance Auto Parts, Inc. was founded in 1929 and is based in Raleigh, North Carolina.
About Lithia Motors
Lithia Motors, Inc. operates as an automotive retailer worldwide. It operates in two segments, Vehicle Operations and Financing Operations. The company’s Vehicle Operations segment sells new and used vehicles; provides parts, repair, and maintenance services; vehicle finance; and insurance products. Its Financing Operations segment provides financing to customers buying and leasing retail vehicles. The company sells its products and services through the Driveway and Greencars brand names through a network of locations, e-commerce platforms, and captive finance solutions. Lithia Motors, Inc. was founded in 1946 and is headquartered in Medford, Oregon.