Originally Posted by
BlackPeter
Great result - congratulations to Todd and his team!
So, lets look at the share price:
Forward PE (at SP $4) is based on (now potentially too conservative) analyst forecasts 12.6, forward earnings CAGR is 8. If things continue the coming years as they started a year or so ago, than this stock looks still really really cheap, doesn't it?
I guess the only question is - will things continue to improve with this velocity or are we already in the exuberance phase? What helped Turners to achieve such an amazing result?
Well, it is hard to get these days new cars given the Covid related production issues all car manufacturers seem to have. Logistic is currently screwed up and semiconductor manufacturers didn't anticipate the swift post Covid ramp up (but a post Covid drop). Question is just - how long will semiconductor manufacturers and car companies need to catch up and swamp the market with new cars. Months? Quarters? Years? Decades? My guess is it will take less than a year ... and I am holding semiconductor manufacturers as well as car manufacturers ... they talk about quarters to resolve the current production issues.
Such problems typically end up in overproduction issues - how long will it take that car manufacturers dump their new surplus cars in our backyard and what will that mean for Turners business?
Another plus for Turner was last FY that many people are not able to hold on money - they just can't fight the urge to spend it as soon as it comes in. Given that Covid took their chances to spend it travelling overseas, they happily spent more money for the next car. How long will this phenomena continue when borders start to open again - or will it be less money available to buy the next banger?
I have no doubt that the team at Turners will adapt ... but the question is - does it make sense to assume that the company will keep growing? Selling used cars is still no rocket science, the barriers to enter the industry are (very) low and the pressure from new car sales will increase.
How much better will it get - and why?
I still see Turners as a cyclical finance company with attached car sales business ... not more and not less. If I look at the SP, it looks SP is currently clearly in its upper quartile. Might stay there as long as the QE funded buying spree continues, but will it really keep rising like phoenix out of the ashes? What happens with all these car loans when (not if) the QE bubble pops?