Insider Selling: David B. Smith Unloads $237K Of Sonic Automotive Stock

David B. Smith, Chairman and CEO at Sonic Automotive SAH, disclosed an insider sell on May 1, according to a recent SEC filing.

What Happened: A Form 4 filing from the U.S. Securities and Exchange Commission on Wednesday showed that Smith sold 3,861 shares of Sonic Automotive. The total transaction amounted to $237,195.

Tracking the Thursday's morning session, Sonic Automotive shares are trading at $57.28, showing a down of 0.0%.

Delving into Sonic Automotive's Background

Sonic Automotive is one of the largest auto dealership groups in the United States. The company has 108 franchised stores in 18 states, primarily in metropolitan areas in California, Texas, and the Southeast, plus 25 EchoPark used-vehicle stores, 16 collision centers, and 13 powersports locations. The franchise stores derive revenue from new and used vehicles plus parts and collision repair, finance, insurance, and wholesale auctions. Luxury and import dealerships make up about 86% of franchise new-vehicle revenue, while Honda, BMW, Mercedes, and Toyota constitute about 58% of new-vehicle revenue. BMW is the largest brand at about 25%. 2023's revenue was $14.4 billion, with EchoPark's portion totaling $2.4 billion. Sonic bought RFJ Auto in December 2021, which added $3.2 billion in sales.

Breaking Down Sonic Automotive's Financial Performance

Negative Revenue Trend: Examining Sonic Automotive's financials over 3 months reveals challenges. As of 31 March, 2024, the company experienced a decline of approximately -3.07% in revenue growth, reflecting a decrease in top-line earnings. As compared to competitors, the company encountered difficulties, with a growth rate lower than the average among peers in the Consumer Discretionary sector.

Interpreting Earnings Metrics:

• Gross Margin: The company faces challenges with a low gross margin of 15.85%, suggesting potential difficulties in cost control and profitability compared to its peers.

• Earnings per Share (EPS): With an EPS below industry norms, Sonic Automotive exhibits below-average bottom-line performance with a current EPS of 1.24.

Debt Management: Sonic Automotive's debt-to-equity ratio is below industry norms, indicating a sound financial structure with a ratio of 4.29.

Financial Valuation Breakdown:

• Price to Earnings (P/E) Ratio: The current P/E ratio of 11.74 is below industry norms, indicating potential undervaluation and presenting an investment opportunity.

• Price to Sales (P/S) Ratio: The current P/S ratio of 0.14 is below industry norms, suggesting potential undervaluation and presenting an investment opportunity for those considering sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): Sonic Automotive's EV/EBITDA ratio at 10.36 suggests potential undervaluation, falling below industry averages.

Market Capitalization Analysis: Reflecting a smaller scale, the company's market capitalization is positioned below industry averages. This could be attributed to factors such as growth expectations or operational capacity.

Now trade stocks online commission free with Charles Schwab, a trusted and complete investment firm.

Unmasking the Significance of Insider Transactions

Insider transactions serve as a piece of the puzzle in investment decisions, rather than the entire picture.

Considering the legal perspective, an "insider" is defined as any officer, director, or beneficial owner holding more than ten percent of a company's equity securities, according to Section 12 of the Securities Exchange Act of 1934. This includes executives in the c-suite and major hedge funds. These insiders are mandated to disclose their transactions through a Form 4 filing, to be submitted within two business days of the transaction.

Pointing towards optimism, a company insider's new purchase signals their positive anticipation for the stock to rise.

Nevertheless, insider sells may not necessarily indicate a bearish view and can be influenced by various factors.

Transaction Codes To Focus On

Surveying the realm of stock transactions, investors often give prominence to those unfolding in the open market, systematically detailed in Table I of the Form 4 filing. A P in Box 3 indicates a purchase, while S signifies a sale. Transaction code C denotes the conversion of an option, and transaction code A denotes a grant, award, or other acquisition of securities from the company.

Check Out The Full List Of Sonic Automotive's Insider Trades.

This article was generated by Benzinga's automated content engine and reviewed by an editor.