Financial Analysis: ARKO (NASDAQ:ARKO) & Lithia Motors (NYSE:LAD)

Lithia Motors (NYSE:LAD) and ARKO (NASDAQ:ARKO) are both consumer discretionary companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, valuation, profitability, institutional ownership, analyst recommendations, dividends and risk.

Institutional & Insider Ownership

78.3% of ARKO shares are owned by institutional investors. 1.1% of Lithia Motors shares are owned by company insiders. Comparatively, 21.9% of ARKO shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk & Volatility

Lithia Motors has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500. Comparatively, ARKO has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.

Profitability

This table compares Lithia Motors and ARKO’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lithia Motors	1.88%	12.16%	3.14%
ARKO	0.19%	4.02%	0.41%

Dividends

Lithia Motors pays an annual dividend of $2.80 per share and has a dividend yield of 0.8%. ARKO pays an annual dividend of $0.12 per share and has a dividend yield of 2.5%. Lithia Motors pays out 9.3% of its earnings in the form of a dividend. ARKO pays out 171.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Lithia Motors has raised its dividend for 16 consecutive years.

Analyst Recommendations

This is a summary of current ratings for Lithia Motors and ARKO, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lithia Motors	0	5	6	0	2.55
ARKO	1	1	1	0	2.00

Lithia Motors currently has a consensus target price of $436.33, indicating a potential upside of 17.31%. ARKO has a consensus target price of $14.50, indicating a potential upside of 205.26%. Given ARKO’s higher possible upside, analysts plainly believe ARKO is more favorable than Lithia Motors.

Valuation and Earnings

This table compares Lithia Motors and ARKO”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lithia Motors	$37.94 billion	0.22	$819.60 million	$30.15	12.34
ARKO	$7.64 billion	0.07	$22.74 million	$0.07	67.86

Lithia Motors has higher revenue and earnings than ARKO. Lithia Motors is trading at a lower price-to-earnings ratio than ARKO, indicating that it is currently the more affordable of the two stocks.

Summary

Lithia Motors beats ARKO on 12 of the 17 factors compared between the two stocks.

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.

About ARKO

Arko Corp. operates convenience stores in the United States. It operates through Retail, Wholesale, Fleet Fueling, and GPMP segments. The Retail segment engages in the sale of fuel and merchandise to retail consumers. Its Wholesale segment supplies fuel to third-party dealers and consignment agents. The Fleet Fueling segment supplies fuel to proprietary and third-party cardlock, and issuance of proprietary fuel cards. Its GPMP segment supplies fuel to retail and wholesale segments. The company is based in Richmond, Virginia.