As of June 8, 2025, Lithia Motors Inc's estimated intrinsic value ranges from $334.52 to $620.24 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $620.24 | +93.1% |
| Discounted Cash Flow (5Y) | $400.76 | +24.8% |
| Dividend Discount Model (Multi-Stage) | $334.52 | +4.2% |
| Dividend Discount Model (Stable) | $350.91 | +9.3% |
| Earnings Power Value | $341.01 | +6.2% |
Is Lithia Motors Inc (LAD) undervalued or overvalued?
With the current market price at $321.15, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Lithia Motors Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.87 | 0.91 |
| Cost of equity | 7.9% | 10.0% |
| Cost of debt | 5.3% | 7.5% |
| Tax rate | 26.5% | 27.2% |
| Debt/Equity ratio | 1.59 | 1.59 |
| After-tax WACC | 5.5% | 7.2% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $401 | $23,502M | 78.8% |
| 10-Year Growth | $620 | $29,215M | 65.7% |
| 5-Year EBITDA | $366 | $22,592M | 77.9% |
| 10-Year EBITDA | $522 | $26,651M | 62.4% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $1,361M |
| Discount Rate (WACC) | 7.2% - 5.5% |
| Enterprise Value | $18,932M - $24,962M |
| Net Debt | $13,070M |
| Equity Value | $5,861M - $11,892M |
| Outstanding Shares | 26M |
| Fair Value | $225 - $457 |
| Selected Fair Value | $341.01 |
| Metric | Value |
|---|---|
| Market Capitalization | $8360M |
| Enterprise Value | $21430M |
| Trailing P/E | 9.85 |
| Forward P/E | 9.91 |
| Trailing EV/EBITDA | 9.75 |
| Current Dividend Yield | 67.71% |
| Dividend Growth Rate (5Y) | 18.04% |
| Debt-to-Equity Ratio | 1.59 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $186.07 |
| Discounted Cash Flow (5Y) | 25% | $100.19 |
| Dividend Discount Model (Multi-Stage) | 20% | $66.90 |
| Dividend Discount Model (Stable) | 15% | $52.64 |
| Earnings Power Value | 10% | $34.10 |
| Weighted Average | 100% | $439.90 |
Based on our comprehensive valuation analysis, Lithia Motors Inc's weighted average intrinsic value is $439.90, which is approximately 37.0% above the current market price of $321.15.
Key investment considerations:
Given these factors, we believe Lithia Motors Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.