KAR - Embedded Expectations Analysis - 2020 08 05
KAR Auction Services, Inc. (KAR:USA) currently trades below recent averages relative to UAFRS-based (Uniform) earnings, with a 18.4x Uniform P/E. At these levels, the market has expectations for profitability to remain at current lows, and management may be concerned about physical revenue per unit growth, car sales recovery, and their Simulcast Plus auctionsSpecifically, management may lack confidence in their ability to sustain physical revenue per unit growth, their car sales and conversion rate recovery, and income from loans. Moreover, they may have concerns about overstocking their backlog and they may be downplaying concerns about the financial health of small vehicle dealers. Furthermore, management may lack confidence in their ability to open their reconditioning services and have their Simulcast Plus auctions replicate physical auction results. Finally, management may be exaggerating the importance of their physical footprint
KAR Auction Services is a holding company. Through its subsidiaries, the company provides used vehicle auctions and related vehicle remarketing services in North America and Europe. The company facilitates a marketplace by providing auction services for sellers of used, or whole car, vehicles through its North American physical auction locations. The company's segments include: ADESA, Inc.'s Auctions, which provides whole car auctions and related services to the vehicle remarketing industry in North America through online auctions and auction facilities; and Automotive Finance Corporation, which provides floorplan financing to independent used vehicle dealers through branches throughout North America.
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