Strong On High Volume: Sonic Automotive (SAH)

Trade-Ideas LLC identified Sonic Automotive ( SAH) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Sonic Automotive as such a stock due to the following factors:

  • SAH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $6.2 million.
  • SAH has traded 92,481 shares today.
  • SAH is trading at 13.06 times the normal volume for the stock at this time of day.
  • SAH is trading at a new high 9.02% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on SAH:

Sonic Automotive, Inc. operates as an automotive retailer in the United States. It operates through two segments, Franchised Dealerships and EchoPark. The stock currently has a dividend yield of 1.2%. SAH has a PE ratio of 1. Currently there are 2 analysts that rate Sonic Automotive a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Sonic Automotive has been 438,000 shares per day over the past 30 days. Sonic Automotive has a market cap of $792.4 million and is part of the services sector and specialty retail industry. The stock has a beta of 1.47 and a short float of 7.5% with 6.09 days to cover. Shares are down 27.4% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sonic Automotive as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 18.9% when compared to the same quarter one year prior, going from $26.13 million to $31.06 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.9%. Since the same quarter one year prior, revenues slightly increased by 5.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SONIC AUTOMOTIVE INC has improved earnings per share by 21.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SONIC AUTOMOTIVE INC reported lower earnings of $1.74 versus $1.88 in the prior year. This year, the market expects an improvement in earnings ($2.14 versus $1.74).
  • Net operating cash flow has significantly decreased to -$61.95 million or 1312.78% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 3.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.20, which clearly demonstrates the inability to cover short-term cash needs.

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