Value
8.1/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.9 |
| P/S | 10.0 |
| EV/EBITDA | 4.7 |
| Fwd P/E | 9.7 |
| PEG | 9.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 7.3x
- ▸PEG: 0.66
- ▸Attractively valued
LAD · Why this verdict
Why Lithia Motors (LAD) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Lithia Motors offers compelling headline valuation—a PEG of 0.69 and a forward earnings multiple near 7.6 times—backed by three beats in the last four quarters; however, below-floor business quality with a Piotroski F-Score of 2 out of 9, 18% short interest, and an asymmetry ratio of only 0.5-to-1 collectively place this name in the avoid category despite the surface-level cheapness.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The overall quality of the business falls below the 4.0 minimum threshold, with a Piotroski F-Score of only 2 out of 9, no identifiable competitive moat, very thin operating margins, and free cash flow at only 70% of net income—indicating the fundamental business underpinning the valuation is not yet of sufficient quality to support a position. Bear case | Quality recovers above 4.0 only if the Piotroski score improves to at least 5 out of 9 and free cash flow exceeds 90% of net income for 2 consecutive quarters. | →Stable |
| CounterAuto dealerships structurally operate on thin margins and the Piotroski framework may not fully capture their asset-intensive dealership economics; the 2-out-of-9 score could overstate the fundamental deterioration at a business that still generates consistent EPS. | ||
At a forward earnings multiple near 7.6 times and a PEG of 0.69, the stock is attractively valued relative to its earnings growth profile, and three of the last four quarters beat analyst estimates—providing some earnings credibility behind the low multiple. Valuation breakdown | This valuation support holds if the forward multiple stays below 12 times and EPS beats continue for 2 of the next 3 quarters. | →Stable |
| CounterA Piotroski F-Score of 2 out of 9 with no identifiable competitive moat suggests the earnings underpinning the cheap multiple may not be durable; free cash flow covers only 70% of net income, raising questions about whether reported earnings fully translate into cash. | ||
Short interest stands at 18% of the float, indicating that a substantial number of market participants expect the stock to decline; this creates a persistent technical headwind that can amplify any negative earnings or macro-driven news. Risk breakdown | The short overhang resolves if short interest falls below 10% of the float, removing the structural technical pressure. | →Stable |
| CounterHigh short interest in a stock with improving momentum—recovering from a death cross with rising volume accumulation—sets up a potential squeeze; if results improve, forced covering could accelerate gains beyond what fundamentals alone would imply. | ||
The risk/reward ratio at current prices is approximately 0.5-to-1, meaning the potential downside to the stop-loss range is nearly twice the upside to the analyst target of $333.23; this asymmetry is well below the 1.5-to-1 minimum needed to justify a new entry. Engine gate (failed) | The asymmetry becomes attractive if the stock pulls back more than 10% from current levels, bringing the reward-to-risk ratio above 1.5-to-1. | →Stable |
| CounterThe analyst consensus still sees approximately 20% upside and the momentum has been recovering; a sustained re-rating on improved earnings could shift the asymmetry quickly without requiring a price correction to create the entry opportunity. | ||
The overall quality of the business falls below the 4.0 minimum threshold, with a Piotroski F-Score of only 2 out of 9, no identifiable competitive moat, very thin operating margins, and free cash flow at only 70% of net income—indicating the fundamental business underpinning the valuation is not yet of sufficient quality to support a position.
→StableBear case
- Expectation
- Quality recovers above 4.0 only if the Piotroski score improves to at least 5 out of 9 and free cash flow exceeds 90% of net income for 2 consecutive quarters.
CounterAuto dealerships structurally operate on thin margins and the Piotroski framework may not fully capture their asset-intensive dealership economics; the 2-out-of-9 score could overstate the fundamental deterioration at a business that still generates consistent EPS.
At a forward earnings multiple near 7.6 times and a PEG of 0.69, the stock is attractively valued relative to its earnings growth profile, and three of the last four quarters beat analyst estimates—providing some earnings credibility behind the low multiple.
→StableValuation breakdown
- Expectation
- This valuation support holds if the forward multiple stays below 12 times and EPS beats continue for 2 of the next 3 quarters.
CounterA Piotroski F-Score of 2 out of 9 with no identifiable competitive moat suggests the earnings underpinning the cheap multiple may not be durable; free cash flow covers only 70% of net income, raising questions about whether reported earnings fully translate into cash.
Short interest stands at 18% of the float, indicating that a substantial number of market participants expect the stock to decline; this creates a persistent technical headwind that can amplify any negative earnings or macro-driven news.
→StableRisk breakdown
- Expectation
- The short overhang resolves if short interest falls below 10% of the float, removing the structural technical pressure.
CounterHigh short interest in a stock with improving momentum—recovering from a death cross with rising volume accumulation—sets up a potential squeeze; if results improve, forced covering could accelerate gains beyond what fundamentals alone would imply.
The risk/reward ratio at current prices is approximately 0.5-to-1, meaning the potential downside to the stop-loss range is nearly twice the upside to the analyst target of $333.23; this asymmetry is well below the 1.5-to-1 minimum needed to justify a new entry.
→StableEngine gate (failed)
- Expectation
- The asymmetry becomes attractive if the stock pulls back more than 10% from current levels, bringing the reward-to-risk ratio above 1.5-to-1.
CounterThe analyst consensus still sees approximately 20% upside and the momentum has been recovering; a sustained re-rating on improved earnings could shift the asymmetry quickly without requiring a price correction to create the entry opportunity.
Per-dimension breakdown
Quality
2.7/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.6 |
| ROA | 2.6 |
| Gross margin | 0.0 |
| Op margin | 1.5 |
| Net margin | 0.9 |
| Current ratio | 4.0 |
| FCF quality | 5.4 |
| Moat | 3.8 |
| Piotroski F | 2.2 |
- ▸Earnings quality warning: 70% FCF/NI
- ▸No competitive moat
- ▸Weak Piotroski F-Score: 2/9
- ▸Quality concerns
Growth
1.4/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.7 |
| EPS growth | 0.0 |
Momentum
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 8.0 |
| Volume | 3.0 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.3 |
| Price target | 7.8 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 21%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Negligible insider selling — $229,574 (0.003% of mkt cap)
Peer rank
5.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.4 |
| quality rank | 2.8 |
| growth rank | 3.8 |
- ▸Attractive P/E vs peers
Technical
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.8 |
| support resistance | 4.0 |
| 52w position | 7.0 |
Risk (lower is worse)
4.3/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 1.7 |
| days to cover | 1.8 |
| volatility | 4.4 |
| put call | 8.7 |
| implied vol | 6.2 |
| max pain risk | 3.0 |
| beta | 6.0 |
| debt equity | 2.5 |
- ▸High short interest justified: 18%
- ▸Above max pain $240
Catalyst
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 3.1 |
| dividend safety | 7.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 77.0%
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (7)
- MOMENTUM:5.2>=4.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:35d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:1.3<1.5@spot
Warning (2)
- MOMENTUM:5.2<5.5 (soft — BUY_NOW allowed but watch)
- DEATH_CROSS:momentum=5.2>=5.0 recovering
Reward-to-Risk
1.34
Upside
+9.1%
Downside
6.8%
Sizing output
AVOID
SetupUNKNOWN — No clear chart pattern; technical signals are mixed
EdgeNO_EDGE — No clear edge identified
SuitabilityMODERATE — Balanced profile
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Value at 8.1 could not lift the engine output above the verdict floor. Failed gate signal: ASYMMETRY:1.3<1.5@spot.
The strongest dimensions are Value at 8.1, Sentiment at 6.9, and Catalyst at 5.4; the weakest are Growth at 1.4, Quality at 2.7, and Risk (lower is worse) at 4.3. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of 1.34 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1At a forward earnings multiple near 7.6 times and a PEG of 0.69, the stock is attractively valued relative to its earnings growth profile, and three of the last four quarters beat analyst estimates—providing some earnings credibility behind the low multiple.
Trip ifForward P/E expands above 12x or EPS misses consensus for 2 consecutive quarters.
- P2The overall quality of the business falls below the 4.0 minimum threshold, with a Piotroski F-Score of only 2 out of 9, no identifiable competitive moat, very thin operating margins, and free cash flow at only 70% of net income—indicating the fundamental business underpinning the valuation is not yet of sufficient quality to support a position.
Trip ifPiotroski F-Score improves to 5 out of 9 or higher and free cash flow exceeds 90% of net income for 2 consecutive quarters.
- P3Short interest stands at 18% of the float, indicating that a substantial number of market participants expect the stock to decline; this creates a persistent technical headwind that can amplify any negative earnings or macro-driven news.
Trip ifShort interest falls below 10% of float.
- P4The risk/reward ratio at current prices is approximately 0.5-to-1, meaning the potential downside to the stop-loss range is nearly twice the upside to the analyst target of $333.23; this asymmetry is well below the 1.5-to-1 minimum needed to justify a new entry.
Trip ifStock price pulls back more than 10% from current levels, bringing the reward-to-risk ratio above 1.5-to-1.