Sonic Automotive (SAH) Margin Miss Reinforces Debate Around Value Versus Earnings Quality

Sonic Automotive (SAH) posted net profit margins of 1.1% for the recent period, down from last year’s 1.4%. Over the past five years, the company remained profitable, growing earnings by 0.7% per year. However, a one-off $121 million loss in the last 12 months notably weighed on the bottom line. With the stock trading at $65.48, below its estimated fair value and analyst targets, investors will be watching how forecasted revenue growth of 7% and projected earnings growth of 18.6% play out against US market benchmarks. The overall picture is one of mixed sentiment, as forecasted growth and dividend appeal are weighed against margin pressure and extraordinary losses.

See our full analysis for Sonic Automotive.

Next, we’ll look at how these results stack up against the most widely followed market narratives. Some expectations may be challenged, while others are confirmed.

See what the community is saying about Sonic Automotive

NYSE:SAH Earnings & Revenue History as at Oct 2025

Service, parts, and warranty (known as fixed operations) made up about 75% of Sonic Automotive’s gross profit, with this segment showing consistent double-digit growth and making it the main earnings engine right now.
Consensus narrative notes that this focus on higher-margin, recurring service revenue is a key reason Sonic’s underlying profitability is more resilient than headline margin pressure implies.
- Bulls see expansion of EchoPark and growth in parts and service as a foundation for margin recovery, directly supporting higher forecasted earnings growth even as vehicle sales growth slows.
- Bears point out that if secular trends like electric vehicle adoption accelerate, the need for repairs and parts could decline in the long run, which would erode the very segment now driving profits.

Sonic Automotive is trading at $65.48 per share, well below its DCF fair value estimate of $122.14 and also below the average analyst price target of 83.44. These gaps point to considerable upside if consensus is correct about future earnings growth and margin expansion.
Analysts’ consensus view emphasizes that for the price gap to close, investors need to believe earnings will nearly double to $310.7 million and margins will improve by 2028, as forecasted.
- The wide discount to both peer and industry valuation multiples creates tension. If anticipated profit growth materializes, today’s price could prove exceptionally attractive.
- However, the large one-off $121 million loss and slower-than-market revenue growth justify some caution, which helps explain why the market is not rushing to price in the full upside potential.

Forecasts call for profit margins to rise from 1.1% to 1.8% over three years, but this optimism sits alongside significant analyst disagreement. The range of 2028 earnings estimates spans from $248 million to $341.9 million, which is a wide divide for a company of this scale.
Analysts’ consensus view highlights that positive drivers like dealership optimization and technology investments could push margins higher, yet risks from digital competitors and declining vehicle ownership rates may offset these gains.
- The consensus sets the price target at 83.44, not far above the current share price, reflecting both expected improvements and very real threats to future net margin.
- This balanced view encourages investors to weigh the company’s improving operations against industry headwinds that could slow or reverse margin recovery.

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Sonic Automotive on Simply Wall St. Add the company to your watchlist or portfolio so you’ll be alerted when the story evolves.

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A great starting point for your Sonic Automotive research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

Sonic Automotive faces uncertainty around shrinking profit margins and heavily relies on a segment that could falter if industry headwinds worsen.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include SAH.

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