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Why the AP Eagers Ltd share price soared today

Credit: NRMA Motoring and Services

Shares in car dealerships business AP Eagers Ltd (ASX: APE) soared 5.8% to $12.59 in afternoon trade after the company announced it would achieve a record profit for the 2015 financial year.

The company expects to report an underlying net profit of $126.4 million for 2015, which is 19% more than the $106.2 million posted in 2014.

The business also flagged a likely $5.5 million impairment on the goodwill associated with its under-performing National Trucks division, with that already reflected in the full year profit estimate.

The business owns and operates motor dealerships and associated facilities across Australia, with 65% of the dealerships situated on properties owned by the company and the rest leased.

The automotive group also has a consistent track record of dividend and earnings per share growth, with dividends up in 11 of the last 12 years as the group expands geographically and via acquisitions.

Over the last five years the stock has followed the earnings higher to return 400% to investors as the group continues to benefit from robust vehicle demand across New South Wales and Queensland in particular.

Another vehicle dealership in Automotive Holdings Group Ltd (ASX: AHG) has also performed well for investors over the past five-year period, although potential investors in AP Eagers need to be aware that the group is priced for strong growth at around 28x trailing earnings of 43.1 cents per share.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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