Canadian automobile sales had suffered a retreat in 2019 compared to a record-breaking 2018.
There was hope of a strong rebound in 2020. Unfortunately, the COVID-19 pandemic would dash those hopes and deal damage to the North American auto industry. Even sure bets like small trucks and electric vehicles saw their sales impacted by the crisis.
AutoCanada (TSX:ACQ) is an Edmonton-based company that operates franchised automobile dealerships across Canada and in some locations in the United States. Its shares have climbed 95% in 2021 as of mid-afternoon trading on May 17. The stock has soared 567% from the prior year. What has been behind AutoCanada’s meteoric rise since the beginning of the pandemic?
Shares of AutoCanada dropped to a near 10-year low in the March 2020 market pullback.
However, the company has made strides in bolstering its business during this tough period. In 2020, the company’s operating profit rose 65% year-over-year to $70.2 million.
Meanwhile, revenue increased 8.3% from the prior year to $876 million in the fourth quarter.
The company reported more progress in the first quarter of 2021. Revenue increased 36% from Q1 2020 to $969 million. Adjusted EBITDA surged 723% to $47.2 million. It managed to outperform the broader Canadian new retail market for the ninth consecutive quarter.
AutoCanada stock still possesses a solid price-to-earnings ratio of 21. It remains to be seen whether AutoCanada will re-initialize its dividend payout. Shares of AutoCanada fell 5.1% in yesterday’s trading session. The company has put together an impressive performance in the face of adversity. However, I’m not eager to jump on the stock in a turbulent market.