Best automotive stocks to invest in Q3 2024

The automotive industry is undergoing a significant transformation, driven by technological advancements, shifting consumer preferences, and the push towards sustainable transportation. As we look ahead, companies in this sector are adapting to these changes, offering investors opportunities in both traditional and emerging automotive markets.

Supply Network Ltd stands out as a key player in the automotive aftermarket, specializing in truck and trailer parts distribution. Group 1 Automotive excels in the automotive retail sector, operating dealerships across multiple brands and countries. Penske Automotive Group leads the way with its diverse portfolio of dealerships and commercial truck operations, demonstrating resilience in a changing market.

Interested in how these automotive leaders could drive your investment portfolio forward? Read on for our comprehensive analysis and expert insights on the best automotive stocks to invest in Q3 2024, and explore the potential for growth in this evolving and vital industry.

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Before we dive into each company, let`s take a look at how your investment would have performed if you had invested in top 10 stocks mentioned in this article 5 years ago.

Now, let`s take a closer look at each of the companies:

  • Group 1 Automotive (GPI)

    In the high-octane world of automobile dealerships, where shiny cars attract and fierce competition revs engines, Group 1 Automotive aims to shift gears towards success. This international dealership group isn't just selling cars; it's orchestrating a multi-brand symphony, offering diverse vehicles across numerous manufacturers. But can this automotive maestro translate its dealership expertise into rewarding returns for your portfolio? Let's explore the hidden horsepower propelling Group 1's rise, alongside the potential potholes to consider before joining this automotive expedition.

    Group 1 Automotive financial statements

    Analysts recommendation: 1.8

    Financial Health

    • Return on assets (ROA): 5.74%
    • Return on equity (ROE): 17.9%
    • Return on investment (ROI): 8.41%

    Profitability

    • Gross margin: 15.83%
    • Operating margin: 4.76%
    • Net profit margin: 2.65%

    Growth

    • EPS (past 5 years): 40.41%
    • EPS (current): 37.42
    • EPS estimate (next quarter): 9.08
    • EPS growth (this year): -13.49%
    • EPS growth (next year): 5.73%
    • EPS growth (next 5 years): -2.29%
    • EPS growth (quarter-over-quarter): -25.41%
    • Sales growth (past 5 years): 9.9%
    • Sales growth (quarter-over-quarter): 10.97%

    💡 Why invest in Group 1 Automotive?

    Group 1's compelling profile makes it a tempting pick for investors seeking exposure to the dynamic automotive retail sector. Here's what fuels its multi-brand engine:

    • Dealership Diversity: Group 1 boasts a vast network of over 200 dealerships across the UK and the US, representing over 30 renowned brands like Audi, BMW, Toyota, and Ford. This brand diversification mitigates risk and caters to diverse customer preferences.
    • Beyond the Showroom: Recognizing the evolving retail landscape, Group 1 expands its offerings, venturing into online sales platforms and used car sales, providing convenience and affordability to customers. This strategic evolution caters to changing consumer behavior.
    • Growth Potential: With operations spanning international markets and plans for further expansion, Group 1 unlocks promising growth opportunities in emerging markets and untapped segments. This global reach positions it for future success.
    • Customer Focus: Group 1 prioritizes a customer-centric approach, investing in after-sales services, loyalty programs, and digital engagement. This focus on customer satisfaction fosters brand loyalty and repeat business.

    🐌 Key considerations before investing in Group 1 Automotive

    While Group 1 navigates the dealership labyrinth with its diverse brands and customer focus, there are some potential roadblocks to consider before joining this high-stakes journey:

    • Valuation Concerns: Like many automotive companies, G1A's stock can be volatile, reflecting expectations of future car sales, economic conditions, and overall market sentiment. A cautious approach with a patient, long-term perspective is wise.
    • Competition Heats Up: Established manufacturers and independent dealerships are vying for market share, challenging Group 1's dominant position. Stay informed about industry trends and how Group 1 plans to maintain its competitive edge.
    • Economic Jitters: Global economic downturns can impact consumer spending on discretionary items like cars, potentially hitting Group 1's profitability. Close monitoring of economic trends and their impact on the automotive sector is crucial.
    • Inventory Management: Fluctuations in vehicle supply and demand can impact profitability, requiring skillful inventory management. Monitoring industry trends and Group 1's inventory strategies is important.

    Final thoughts on Group 1 Automotive

    Group 1's diverse brand portfolio, international reach, focus on online sales and used cars, and customer-centric approach paint a potentially promising picture for long-term investors seeking exposure to the dynamic automotive retail sector. However, the volatile nature of the stock, rising competition, economic sensitivity, and inventory management challenges warrant a measured approach. Thorough research, analysis of Group 1's future plans and the automotive landscape, and a clear understanding of your risk tolerance are crucial before joining this automotive expedition. Remember, navigating the intricate terrain of automotive stocks requires both a discerning eye for market trends and a balanced perspective on potential challenges. Choose wisely, and your portfolio might just find itself riding smoothly alongside the success story of Group 1 Automotive.

  • Ferrari N.V. (RACE)

    Ferrari N.V. is an iconic luxury sports car manufacturer with a rich history and a global cult following. Renowned for its high-performance vehicles, exquisite design, and racing heritage, Ferrari embodies the pinnacle of automotive excellence.

    Ferrari N.V. financial statements

    Analysts recommendation: 2.27

    Financial Health

    • Return on assets (ROA): 16.47%
    • Return on equity (ROE): 47.62%
    • Return on investment (ROI): 27.81%

    Profitability

    • Gross margin: 49.76%
    • Operating margin: 27.58%
    • Net profit margin: 21.79%

    Growth

    • EPS (past 5 years): 8.76%
    • EPS (current): 8.3
    • EPS estimate (next quarter): 2.17
    • EPS growth (this year): 16.19%
    • EPS growth (next year): 9.73%
    • EPS growth (next 5 years): 14.08%
    • EPS growth (quarter-over-quarter): 23.21%
    • Sales growth (past 5 years): 10.53%
    • Sales growth (quarter-over-quarter): 14.91%

    💡 Why invest in Ferrari N.V.?

    Ferrari offers several potential advantages for investors seeking exposure to the luxury sector:

    • Strong Brand Equity: Ferrari possesses one of the world's most powerful and recognizable brands, commanding premium pricing for its vehicles.
    • Limited Production: The company maintains exclusivity by limiting production volumes, which contributes to high demand and pricing.
    • Diversification Beyond Automobiles: Ferrari is expanding its luxury lifestyle offerings, including merchandise and experiences, to diversify revenue streams.
    • Focus on Innovation: The company invests heavily in research and development to maintain its technological leadership and introduce cutting-edge models.

    🐌 Key considerations before investing in Ferrari N.V.

    However, before investing in Ferrari, it's crucial to consider these potential challenges:

    • Economic Sensitivity: Luxury goods are often considered discretionary purchases, and economic downturns can impact demand for high-end vehicles.
    • Competitive Landscape: The luxury automotive market is competitive, with other premium brands vying for customers.
    • Supply Chain Risks: Disruptions in the global supply chain can affect production and costs.
    • Regulatory Environment: The automotive industry is subject to various regulations, including emissions standards and safety requirements, which can impact product development and costs.

    Final thoughts on Ferrari N.V.

    Ferrari's iconic brand, limited production strategy, and focus on luxury and performance make it an attractive investment for those seeking exposure to the premium automotive sector. However, economic sensitivity, competition, supply chain risks, and regulatory challenges necessitate careful consideration. Thorough research on Ferrari's product pipeline, expansion plans, and financial performance is crucial before investing.

  • Penske Automotive Group (PAG)

    Penske Automotive Group isn't a household name for everyone, but in the world of car dealerships, they're a major force. Forget about the stereotypical used car lot, Penske Automotive focuses on high-quality dealerships for both new and used vehicles. Imagine them as the navigators of the automotive retail landscape, offering a variety of car brands and financing options to meet diverse customer needs. Their dealerships cater to a broad range of car buyers, from budget-conscious consumers to luxury car enthusiasts. Their focus on customer service and a diversified brand portfolio positions them as a leader in the ever-evolving automotive retail industry.

    Penske Automotive Group financial statements

    Analysts recommendation: 3

    Financial Health

    • Return on assets (ROA): 5.79%
    • Return on equity (ROE): 19.5%
    • Return on investment (ROI): 10.18%

    Profitability

    • Gross margin: 15.97%
    • Operating margin: 3.81%
    • Net profit margin: 3.05%

    Growth

    • EPS (past 5 years): 22.88%
    • EPS (current): 13.57
    • EPS estimate (next quarter): 3.49
    • EPS growth (this year): -15.1%
    • EPS growth (next year): 2.89%
    • EPS growth (next 5 years): 0.1%
    • EPS growth (quarter-over-quarter): -18.26%
    • Sales growth (past 5 years): 5.99%
    • Sales growth (quarter-over-quarter): 3.06%

    💡 Why invest in Penske Automotive Group?

    Why Consider Penske Automotive Group for Your Investment Portfolio?

    • Diversified Brand Portfolio: They offer a variety of new and used car brands, reducing reliance on the performance of any single automaker.
    • Focus on Customer Service: Penske emphasizes a positive customer experience, potentially leading to repeat business and brand loyalty.
    • Geographic Reach: Penske Automotive operates dealerships across the United States, offering exposure to a wider market.
    • Recurring Revenue: The ongoing demand for car maintenance and parts sales provides a steady stream of revenue for Penske.

    🐌 Key considerations before investing in Penske Automotive Group

    However, before investing in Penske Automotive, it's crucial to consider the potential challenges:

    • Cyclicality of Auto Sales: Car sales are cyclical and can be impacted by economic downturns, interest rate changes, and consumer confidence.
    • Competition: The auto dealership industry is competitive, with both franchised and independent dealerships vying for market share.
    • Dependence on Manufacturer Rebates and Incentives: Profitability can be influenced by manufacturer incentives offered to dealerships.
    • Shifting Consumer Preferences: The growing popularity of electric vehicles and alternative ownership models could disrupt the traditional car dealership business model.

    Final thoughts on Penske Automotive Group

    Penske Automotive Group's focus on customer service, their diversified brand portfolio, and the overall demand for vehicles paint a promising picture for long-term investors seeking exposure to the automotive retail sector. However, the cyclical nature of car sales, the competitive landscape, dependence on manufacturer incentives, and the evolving automotive landscape necessitate careful consideration. Thorough research on Penske's sales trends, their dealership network, and a clear understanding of overall economic and consumer spending trends are crucial before adding them to your portfolio. Remember, sometimes the greatest rides come from reliable dealerships. Penske Automotive Group could be the vehicle that drives your investment journey forward, but be sure to check the tire pressure of potential risks before investing.

  • AutoNation (AN)

    AutoNation is America's largest automotive retailer, operating a vast network of new and used vehicle dealerships across the United States. They offer a comprehensive range of automotive services, including sales, financing, insurance, parts, and after-sales service.

    AutoNation financial statements

    Analysts recommendation: 2.15

    Financial Health

    • Return on assets (ROA): 6.53%
    • Return on equity (ROE): 36.5%
    • Return on investment (ROI): 12.68%

    Profitability

    • Gross margin: 17.42%
    • Operating margin: 4.53%
    • Net profit margin: 2.93%

    Growth

    • EPS (past 5 years): 39.29%
    • EPS (current): 18.27
    • EPS estimate (next quarter): 4.62
    • EPS growth (this year): -22.94%
    • EPS growth (next year): 10.48%
    • EPS growth (next 5 years): 24.7%
    • EPS growth (quarter-over-quarter): -46.82%
    • Sales growth (past 5 years): 5.25%
    • Sales growth (quarter-over-quarter): -5.95%

    💡 Why invest in AutoNation?

    AutoNation offers several potential advantages for investors seeking exposure to the automotive retail sector:

    • Scale and Diversification: With a large network of dealerships across various regions and selling multiple brands, AutoNation benefits from economies of scale and reduced geographic risk.
    • Focus on Customer Experience: AutoNation emphasizes customer satisfaction and loyalty, which can lead to repeat business and positive word-of-mouth.
    • Diversified Revenue Streams: In addition to vehicle sales, AutoNation generates revenue from after-sales services, financing, and insurance, creating multiple revenue streams.
    • Potential for Growth: The automotive industry, while cyclical, continues to evolve with new technologies and consumer preferences, offering growth opportunities for AutoNation.

    🐌 Key considerations before investing in AutoNation

    However, before investing in AutoNation, it's crucial to consider these potential challenges:

    • Economic Sensitivity: The automotive industry is cyclical, and economic downturns can impact vehicle sales and consumer spending.
    • Competition: The automotive retail industry is highly competitive, with both traditional dealerships and online retailers vying for customers.
    • Inventory Management: Managing a large inventory of vehicles requires careful planning and can be affected by changes in vehicle demand and supply.
    • Regulatory Environment: The automotive industry is subject to various regulations, including emissions standards and consumer protection laws, which can impact costs and operations.

    Final thoughts on AutoNation

    AutoNation's scale, focus on customer experience, and diversified revenue streams make it an attractive investment for those interested in the automotive retail sector. However, the cyclical nature of the industry, competition, inventory management challenges, and regulatory environment necessitate careful consideration. Thorough research on AutoNation's expansion plans, its customer satisfaction metrics, and a clear understanding of overall economic and automotive industry trends are crucial before adding it to your portfolio.

  • Supply Network (ASX:SNL)

    In the sprawling world of truck and bus parts, where engines roar and supply chains hum, Supply Network Ltd (SNL) stands tall. This Australian giant isn't just pushing wrenches and brake pads; it's orchestrating a complex symphony of parts interpretation, procurement, and supply management, keeping the wheels turning across diverse industries. But can this parts maestro translate its logistical prowess into rewarding returns for your portfolio? Let's explore the hidden reserves fueling SNL's rise, alongside the potential detours to consider before joining this automotive expedition.

    💡 Why invest in Supply Network?

    SNL's robust profile makes it a tempting pick for investors seeking exposure to the dynamic Australian transportation sector. Here's what fuels its engine of parts and services:

    • Truck & Bus Parts Champion: SNL boasts the leading position in the Australian and New Zealand truck and bus replacement parts market, with a vast network of over 140 stores and a comprehensive product offering. This leadership in the sector translates to predictable cash flows and a strong foundation for future growth.
    • Beyond the Spanner: Recognizing the evolving needs of its customers, SNL expands its offerings, venturing into services like parts interpretation, technical support, and on-site inventory management. This strategic diversification mitigates risk and unlocks diverse avenues for growth beyond traditional parts distribution.
    • E-Commerce Engine: Embracing the digital age, SNL invests heavily in its online platform, offering convenient access and competitive prices to customers across Australia and New Zealand. This focus on e-commerce caters to changing buying habits and expands the company's reach.
    • Growth Potential: With ambitious expansion plans and a focus on emerging markets like Southeast Asia, SNL unlocks promising growth opportunities beyond its core markets. This regional reach further bolsters its future prospects.

    🐌 Key considerations before investing in Supply Network

    While SNL navigates the automotive labyrinth with its diverse offerings and digital focus, there are some potential roadblocks to consider before joining this high-stakes journey:

    • Valuation Concerns: Like many industrials, SNL's stock can be volatile, reflecting expectations of future economic conditions, vehicle sales, and overall market sentiment. A cautious approach with a patient, long-term perspective is wise.
    • Competition Heats Up: Smaller regional players and global automotive giants are vying for market share, challenging SNL's dominant position. Stay informed about industry trends and how SNL plans to maintain its competitive edge.
    • Supply Chain Jitters: Global disruptions and rising shipping costs can impact SNL's inventory management and profitability. Monitoring global trade developments and SNL's adaptation strategies is crucial.
    • Electric Vehicle Evolution: The shift towards electric vehicles could impact demand for traditional replacement parts in the long run, posing a challenge to SNL's core business. Staying informed about EV adoption trends and SNL's diversification strategies is important.

    Final thoughts on Supply Network

    SNL's leadership in truck and bus parts, diversified service offerings, e-commerce focus, and growth potential in emerging markets paint a potentially promising picture for long-term investors seeking exposure to the Australian transportation sector. However, the volatile nature of the stock, rising competition, supply chain challenges, and the EV transition warrant a measured approach. Thorough research, analysis of SNL's future plans and the automotive landscape, and a clear understanding of your risk tolerance are crucial before joining this automotive expedition. Remember, navigating the intricate terrain of industrial stocks requires both a discerning eye for market trends and a balanced perspective on potential challenges. Choose wisely, and your portfolio might just find itself riding smoothly alongside the success story of Supply Network Ltd.

  • Copart (CPRT)

    While Copart might not be a household name, within the niche world of vehicle salvage, they're a global leader. Forget about junkyards of the past, Copart operates a network of high-tech facilities that efficiently auction off accident-damaged, repossessed, and end-of-life vehicles. Imagine them as the digital marketplace for wrecked rides, offering a platform for buyers to find repairable vehicles or valuable parts at competitive prices. Their services cater to a broad range of participants, from insurance companies and salvage yards to individual mechanics and parts resellers. Copart's dedication to innovation and a focus on online auctions position them as a key player in the transforming automotive salvage industry.

    Copart financial statements

    Analysts recommendation: 2.15

    Financial Health

    • Return on assets (ROA): 19.33%
    • Return on equity (ROE): 21.75%
    • Return on investment (ROI): 19.11%

    Profitability

    • Gross margin: 44.63%
    • Operating margin: 38.49%
    • Net profit margin: 33.33%

    Growth

    • EPS (past 5 years): 24.28%
    • EPS (current): 1.43
    • EPS estimate (next quarter): 0.37
    • EPS growth (this year): 14.73%
    • EPS growth (next year): 12.84%
    • EPS growth (next 5 years): 22.3%
    • EPS growth (quarter-over-quarter): 8.09%
    • Sales growth (past 5 years): 17.66%
    • Sales growth (quarter-over-quarter): 10.32%

    💡 Why invest in Copart?

    Why Consider Copart for Your Investment Portfolio?

    • High Recurring Revenue: The demand for used auto parts and repairable vehicles remains constant, providing Copart with a steady stream of revenue.
    • Network Effect: Their extensive network of facilities and online platform attract more sellers and buyers, creating a self-reinforcing cycle that strengthens their market position.
    • Focus on Technology: Copart prioritizes innovation in online auctions, vehicle inspection, and titling processes, improving efficiency and customer experience.
    • Global Reach: They operate facilities across multiple countries, offering exposure to a wider market and potential for further expansion.

    🐌 Key considerations before investing in Copart

    Investment Considerations Before Investing in Copart

    • Economic Downturn: Economic downturns can lead to fewer accidents and car sales, potentially decreasing the supply of vehicles entering the salvage market.
    • Fluctuations in Metal Prices: The value of scrap metal, a key component of salvaged vehicles, can fluctuate, impacting Copart's revenue.
    • Regulation and Environmental Issues: The auto salvage industry is subject to regulations regarding environmentally safe vehicle dismantling and disposal. Changes in these regulations could increase operational costs.
    • Competition: While Copart is a leader, there are other players in the auto salvage market, and competition could intensify in the future.

    Final thoughts on Copart

    Copart's focus on innovation, their extensive network, and the resilient nature of the auto salvage industry paint a promising picture for long-term investors seeking exposure to this unique market segment. However, the cyclical nature of the auto industry, dependence on metal prices, potential regulatory changes, and competition necessitate careful consideration. Thorough research on Copart's geographic reach, their technology investments, and a clear understanding of overall economic and regulatory trends are crucial before adding them to your portfolio. Remember, sometimes the most valuable opportunities come from unexpected places. Copart could be the engine that drives your investment journey in the auto salvage sector, but be sure to check the oil gauge of potential risks before investing.

If you are interested in other stock categories, check out my other lists of the best hotel, tech, retail, financial, basic materials, utility, beauty, insurance, energy, industrial, healthcare, semiconductor, construction, manufacturing, cybersecurity, AI, defense, communication services, real estate, waste management stocks.