Originally Posted by
Beagle
Buy Right Cars Ltd profit margin of only 4.8% shows the vulnerability of this business to changing economic conditions. If sales slow and stock turn decreases and holding costs increase it doesn't take much of a change to wipe that margin out and remember this company is trading in benign trading conditions with good economic growth, a higher than average currency, generation low interest rates and record ever immigration level's. I've done more than a few sets of car dealers books over my 35 years of bean counting and can't recall off the top of my head seeing margins that slim before, (mind you these are privately owned companies with very statute owners). Its a VERY tough and competitive industry with multiple failures on a regular basis. To put this 4.8% margin in context this is considerably less than the margin AIR New Zealand operate on and we all know airlines are cyclical business's vulnerable to changing economic conditions which is why we stick with a PE of 10, (cyclical).