Wade, re MAJR.ob. First off, car dealerships will get far below market PEs because of the brutal competitive nature of their business. They are selling commodities, with very little ability to mark up or control prices.
The sales increase that MAJR has experienced is due to the following:
"In the first six months of 2005, our operations generated pre-tax income of
approximately $3,401,000 and net income of approximately $2,332,000. In the
comparable quarter of 2004, our operations resulted in pre-tax income of
$1,115,000 and net income of $1,055,000. The most significant factor in this
result was the increase in our gross profits. In the 2005 six-month period our
sales increased by $47.5 million to $236.3 million, or 25.2%, from $188.8
million in the 2004 comparable period. We believe this sales increase is
attributable to a continuation of a trend that developed in 2004. New vehicle
manufacturers have continued to offer cash-back and other incentives. This has
led more customers who were formerly used car buyers toward purchases of new
vehicles. Both the revenue per new vehicle sold and the gross profit per new
vehicle sold remained relatively flat, but the volume of new vehicle unit sales
increased 26.0%.
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How sustainable is this trend? Won't car manufacturers have to stop offering substantial discounts at some point? And will the huge current incentives cannibalize future sales? With such a low growth outlook, IMO, its hard to know where the true value is here.
Just my two cents.