APE - eagers automotive
090726
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Over the last five years, Eagers Automotive (ASX: APE) has seen steady revenue growth to record highs (BYD & EV vehicles ), though net profit and Return on Equity (ROE) have experienced volatility and compressed from their cyclical peaks. Main competitor is PWR - peter warren holdings and independent mechanics who compete on price. [1, 2]
Financial Highlights (Last 5 Years)
- Profit: Eagers Automotive posted a record revenue of $13.05 billion for the full year 2025 (a 16.5% year-on-year increase). Net profit for FY2025 came in at $226.7 million, rebounding 11% compared to 2024 but remaining below the cyclical highs of over $281 million achieved in FY2023. [1, 2, 3, 4, 5]
- Debt: Total debt increased as the company engaged in strategic expansions, sitting around $3.06 billion in liabilities, with long-term debt reported at $1.18 billion. This looks very high ......However, the debt-to-equity ratio has trended down (from 127.9% to 111.1%) and the company maintains a low, manageable gearing ratio of 0.18x. [1, 2, 3, 4, 5]
- ROE (Return on Equity): Reflecting the broader normalization of the automotive market and higher expenses, APE's ROE has compressed from a multi-year peak of 27.2% in 2022 to approximately 14.3%. [1, 2, 3]
You can track real-time APE statistics or view the detailed financials overview to monitor how they balance their debt and capital management in the future.
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The historical 10-year mean P/E ratio for Eagers Automotive Limited (ASX: APE) is 12.79x, with a median of 13.95x [1.31]. The company's valuation has experienced significant cyclical volatility over the decade, heavily influenced by dealership mergers (such as the AHG acquisition in 2019), the COVID-19 supply chain disruptions, and the post-pandemic automotive retail boom. [1]
Annual P/E Ratio History (2016–2026)
| Year | Approximate P/E Ratio (FY Ending Dec) | Context & Valuation Drivers |
|---|---|---|
| 2026 (TTM) | 24.21x | Trading elevated relative to historical averages. |
| 2025 | 26.9x – 30.7x | Valuation expanded sharply following a correction in earnings momentum. |
| 2024 | 12.3x – 13.2x | Compressed as vehicle supply normalized and margins faced pressure. |
| 2023 | 13.4x | Stable pricing aligned close to the company's historical median. |
| 2022 | 14.9x | Normalizing down from pandemic highs as broader market multiples cooled. |
| 2021 | 13.2x | Exceptionally high earnings (strong margins from vehicle shortages) kept the net P/E low despite stock price gains. |
| 2020 | 52.11x (Peak) | Spiked heavily in mid-2020 due to severely depressed lockdown-era earnings. |
| 2019 | -3.04x (Trough) | Bottomed out in negative territory following statutory losses and massive restructuring costs from the AHG acquisition. |
| 2018 | 10.8x | Subdued valuation reflecting a cooling Australian residential property market and lower consumer discretionary spend. |
| 2017 | 13.9x | Aligned directly with the long-term historical average. |
| 2016 | 15.5x | Steady, mature automotive retail cycle trading at standard retail market multiples. |
Extreme Valuation Milestones
Key Analytical Takeaways
- Cyclical Nature: As a specialty auto retailer, Eagers Automotive's earnings fluctuate with vehicle availability, interest rates, and consumer discretionary income, swinging the multiple across cycles. [1, 2]
- Premium Rating: The current P/E ratio sits notably higher than the Australian Specialty Retail industry average (~15.6x), meaning the market has priced in a strong premium or expects a rebound via initiatives like their current share buyback. [1, 2]
- The longterm share price sits between $10 and $15... with a yield above 4%
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ROIC VS WACC
Eagers Automotive (ASX:APE) maintains a relatively balanced economic spread, with a current trailing return on invested capital (ROIC) of roughly 7.88% to 8.61% narrowly tracking or exceeding its weighted average cost of capital (WACC) of approximately 7.2% to 7.93%. Over the past 10-year cycle, Eagers Automotive Ltd has generally hovered around a 10-year median WACC of 8.41%, with post-2020 operational scale expansion pushing ROIC into positive value-creation territory during peak automotive industry years. [1, 2, 3]
Capital Returns vs. Cost of Capital
- Current ROIC: ~7.88%–8.61% (driven by strong post-pandemic dealership revenue and property holdings).
- Current WACC: ~7.2%–7.93% (comprising a cost of equity near 7.95% and cost of debt near 5.5%–6.59%).
Historical Context and Value Creation
- Value Spread: For most of the past decade, APE's operational efficiency and major acquisitions (such as Automotive Holdings Group) allowed its ROIC to fluctuate close to or moderately above its cost of capital during high-margin periods.
- Capital Structure: Debt accounts for roughly 16%–40% of financing components depending on floor-plan adjustments and property lease accounting under AASB 16, stabilizing its overall blended cost of capital near the high-7% range historically.
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Warren Buffett analysis
Even if you look past its Australian geography and relatively small $5.15 billion AUD market cap, Warren Buffett would likely hesitate to buy Eagers Automotive Limited (ASX:APE) at its current valuation.
While it perfectly aligns with his circle of competence and features strong insider alignment, its thin profit margins and capital-intensive nature conflict with his preference for high-margin, wide-moat compounders.
Where ASX:APE Fits Buffett’s Strategy
- Deep Circle of Competience: Buffett understands car dealerships intimately. Berkshire Hathaway operates Berkshire Hathaway Automotive (one of the largest dealership groups in the US), so APE's business model—selling new/used vehicles, servicing, and financing—falls squarely within his domain. [1, 2]
Why Buffett Would Likely Pass
- Thin Economic Moat & Margin Profile: Dealerships are structurally low-margin, highly cyclical businesses. Eagers operates on an underlying net profit margin of just 3.3%. Buffett typically hunts for companies with immense pricing power and thick, defensive margins. [1]
- Capital Intensity and Debt: Car retailing is highly asset-heavy, requiring substantial capital locked up in inventory and property. APE carries heavy total liabilities, including over $5.3 billion AUD in total debt (largely driven by inventory floorplan financing and leases), which strains the clean balance sheet criteria Buffett prefers. [1, 2]
- Valuation Disconnect: Buffett searches for a clear "margin of safety". Trading at a trailing price-to-earnings (P/E) ratio of over 21x, Eagers is valued like a high-growth compounder despite facing broader cyclical headwinds and EV agency model disruptions in the global auto retail industry.
- Aim for a P/E ratio of about 15 ( ie around the $11-13 region)
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To have a P/E ratio of 15, Eagers Automotive Limited (ASX: APE) would need to trade at a share price between AUD $11.55 and AUD $12.75, depending on the exact trailing twelve-month (TTM) earnings per share (EPS) metric used.
The calculation uses the formula:
Target Price = Target P/E Ratio (15) × Current Earnings Per Share (EPS). [1]Because major financial platforms calculate trailing EPS slightly differently based on how they adjust for one-off items or normalize recent half-year earnings reports, the target price breakdown based on available 2026 data looks like this:
| Financial Source | Reported TTM EPS | Share Price Needed for a 15 P/E |
|---|---|---|
| GuruFocus (Diluted TTM ended June 2026) | AUD $0.85 | AUD $12.75 |
| Stock Analysis (TTM as of Sept 2026) | AUD $0.77 | AUD $11.55 |
Summary of Context
- Current Trading Price: For comparison, APE's actual market price floats around the AUD $19.41 to $19.72 range, meaning it currently trades at a trailing P/E multiple north of 23x. [1, 2]
- Target Interpretation: To hit a compressed P/E multiple of 15 without a change in profits, the stock price would need to drop by roughly 35% to 40% from current levels
Python
eps_options = [0.85, 0.77, 1.25]
target_pe = 15
prices = [eps * target_pe for eps in eps_options]
print(list(zip(eps_options, prices)))
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