Why the Automotive Holdings Group Ltd share price has tumbled 11% today

Credit: AREA Construction

Unfortunately for its shareholders, the Automotive Holdings Group Ltd (ASX: AHG) share price has fallen this morning following the release of a trading update.

At the time of writing its shares are down 11% to $3.01, bringing their year-to-date decline to 23%.

What happened?

Yesterday auto retailer AP Eagers Ltd (ASX: APE) downgraded its full-year profit guidance due to weak trading conditions.

Today it was the turn of Automotive Holdings Group to advise how these trading conditions had impacted its business.

With car sales down sharply nationwide on the prior corresponding period and tighter consumer credit conditions in the automotive financing market leading to lower margins across the industry, Automotive Holdings Group has had a tough second-half.

In light of this management has advised that full-year operating profit after tax is expected to be in the region of $87 million and $89 million. Down between 8.4% and 10.4% year-on-year.

Previous guidance given in its February interim results was for full-year operating net profit after tax ahead of FY 2016.

Should you invest?

While the shares of both Automotive Holdings Group and AP Eagers look remarkably cheap following recent declines, it might be worth giving them both a wide berth until there are signs of improvement in the auto retail industry.

When things do improve, however, I feel both companies will be well worth taking a closer look at. Especially with their generous dividends.

In the meantime this high-yielding dividend share could be a far better option for income investors in my opinion. Its generous yield and international expansion make it a great pick in my opinion.

We've just released our #1 dividend pick for 2017. And the winner is...

With its shares up 155% in just the last five years, this 'under the radar' consumer favourite is both a hot growth stock AND our expert's #1 dividend pick for 2017. Now we're pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is click the link below!

Simply click here to receive your copy of our brand-new FREE report, "The Motley Fool's Top Dividend Stock for 2017."

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.