The average target price of PWR.AX is 1.4 and suggests 15% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 1.5. This is lower than the current market price, meaning that even the most optimistic analyst does not see upside potential. On the other hand, the most pessimistic analyst has a target price of 1.3. This is equivalent to 18% downside potential in the worst case. 

Peter Warren Automotive Holdings Limited engages in the retail of new and used cars in Australia. The company also provides vehicle maintenance and repair services, parts, and protection and other aftermarket products; and extended service contracts, as well as financing and insurance services. It operates 82 franchise operations. The company was founded in 1958 and is based in Sydney, Australia.

Australia

Peter Warren Automotive Holdings Limited

Consumer Cyclical

The company tries to pay dividends regularly but only sometimes does so. It has paid dividends in roughly half the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. On average, the company pays dividends annually. 

PWR.AX reported revenue of AUD 2 500mn in the last 12 months, up 10% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 64% from FY23 to AUD 0.10. Market expects EPS to reach AUD 0.06 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 5ppts and its growth accelerated by 8ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 6.5% in the last 12 months, up from 4.8% in FY24. 

Historically, PWR.AX has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 0.7%, down from 1.5% in FY24. 

In the last 12 months, the return on capital employed (RoCE) declined to 2.2%, below the peers. The consensus estimate for FY25 for RoCE is 3.0%, again behind the peers. 

Another important profitability metric, return on assets (RoA), amounted to 1.3% in the last 12 months, a decrease from 2.6% in FY24. The market analysts predict that RoA will be 0.7% in FY25, again weaker than its peers. 

Peter Warren Automotive Holdings Limited reported a return on equity (RoE) of 3.6% in the last 12 months, down from 7.0% in FY24. The market consensus projects an RoE of 2.0% in FY25, again behind its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.0 in the past several years. This ratio implies a poor shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

PWR.AX has very poor trading liquidity. It will take at least a day or two for the average private investor to sell a common position under normal market conditions. Liquidity is very unstable and becomes extremely unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to weak positions in its industry, bleak profitability, negligible return on capital, poor working capital management, weak debt servicing capacity, and an unfavourable capital structure. We note low margin volatility, among the positive credit factors. 

In highly turbulent market conditions, PWR.AX is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, PWR.AX is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to minimal. 

Based on key historical and expected multiples, the stock is undervalued relative to its peers. In particular, the stock is reasonably priced on P/E, 'cheap' on EV/EBITDA, undervalued on P/FCF. 

Peter Warren Automotive Holdings Limited

A$ 1.56

4

Peter Warren Automotive Holdings Limited

A$ 1.56

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

A$ 1.56

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