Critical Review: TravelCenters of America (TA) & Sonic Automotive (SAH)

TravelCenters of America (NASDAQ: TA) and Sonic Automotive (NYSE:SAH) are both small-cap retail/wholesale companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, dividends, analyst recommendations, risk and valuation.

Dividends

Sonic Automotive pays an annual dividend of $0.24 per share and has a dividend yield of 1.1%. TravelCenters of America does not pay a dividend. Sonic Automotive pays out 13.0% of its earnings in the form of a dividend. Sonic Automotive has raised its dividend for 2 consecutive years.

Risk and Volatility

TravelCenters of America has a beta of 1.68, meaning that its share price is 68% more volatile than the S&P 500. Comparatively, Sonic Automotive has a beta of 1.6, meaning that its share price is 60% more volatile than the S&P 500.

Earnings and Valuation

This table compares TravelCenters of America and Sonic Automotive’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TravelCenters of America $6.05 billion 0.02 $9.26 million ($0.30) -10.33
Sonic Automotive $9.87 billion 0.09 $92.98 million $1.85 11.46

Sonic Automotive has higher revenue and earnings than TravelCenters of America. TravelCenters of America is trading at a lower price-to-earnings ratio than Sonic Automotive, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares TravelCenters of America and Sonic Automotive’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TravelCenters of America 0.46% -5.55% -1.89%
Sonic Automotive 0.92% 11.09% 2.23%

Analyst Ratings

This is a summary of recent ratings and target prices for TravelCenters of America and Sonic Automotive, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TravelCenters of America 0 1 2 0 2.67
Sonic Automotive 0 3 1 0 2.25

TravelCenters of America currently has a consensus price target of $7.67, indicating a potential upside of 147.31%. Sonic Automotive has a consensus price target of $23.33, indicating a potential upside of 10.06%. Given TravelCenters of America’s stronger consensus rating and higher possible upside, equities research analysts clearly believe TravelCenters of America is more favorable than Sonic Automotive.

Institutional & Insider Ownership

30.8% of TravelCenters of America shares are owned by institutional investors. Comparatively, 63.6% of Sonic Automotive shares are owned by institutional investors. 3.8% of TravelCenters of America shares are owned by insiders. Comparatively, 32.3% of Sonic Automotive shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Sonic Automotive beats TravelCenters of America on 12 of the 17 factors compared between the two stocks.

About TravelCenters of America

TravelCenters of America LLC operates travel centers and convenience stores in the United States and Canada. It operates in two segments, Travel Centers and Convenience Stores. Its travel centers offer a range of products and services, including diesel fuel and gasoline, as well as nonfuel products and services, such as truck repair and maintenance services, full service restaurants, quick service restaurants (QSR), and various customer amenities. As of December 31, 2017, it operated 256 travel centers under the TravelCenters of America, TA, Petro Stopping Centers, and Petro brand names. The company's convenience stores offer gasoline, as well as various nonfuel products and services, including coffee, groceries, and fresh foods, as well as a QSR and/or car wash. As of December 31, 2017, the company operated 233 convenience stores under the Minit Mart brand name. The company serves trucking fleets and their drivers, independent truck drivers, highway and local motorists, and casual diners. TravelCenters of America LLC was founded in 1992 and is headquartered in Westlake, Ohio.

About Sonic Automotive

Sonic Automotive, Inc. operates as an automotive retailer in the United States. It operates in two segments, Franchised Dealerships and Pre-Owned Stores. The Franchised Dealerships segment is involved in the sale of new and used cars and light trucks, and replacement parts; provision of vehicle maintenance, manufacturer warranty repair, and paint and collision repair services; and arrangement of extended warranties, service contracts, financing, insurance, and other aftermarket products. The Pre-Owned Stores segment operates stand-alone pre-owned specialty retail locations, which enable customers to search, buy, service, finance, and sell pre-owned vehicles. As of December 31, 2017, the company operated 114 new vehicle franchises in 13 states representing 25 brands of cars and light trucks; 18 collision repair centers; and 9 pre-owned vehicle stores. Sonic Automotive, Inc. was founded in 1997 and is based in Charlotte, North Carolina.

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