SAH

Sonic is one of the largest U.S. auto retailers, running three segments (111 franchised stores across 24 brands, 18 EchoPark used-car stores, 14 Powersports locations). The top line is healthy: FY2025 revenue grew 6.5% to $15.2B and gross profit rose 8.7% to $2.38B, lifting gross margin to 15.7% — a sign the core franchised dealership and Fixed Operations businesses are intact. Cash generation is the standout: operating cash flow jumped 419.6% to $567M against only $150M of capex, comfortably funding $82.4M of buybacks and $48.8M of dividends. The balance sheet is workable, with $1.07B equity against $1.56B long-term debt and an 11.1% ROE.

The problem is earnings quality and price. Net income fell 45% to $119M and diluted EPS dropped 44.7% to $3.42, while operating income declined 20.4% to $368M — so profit is shrinking even as revenue grows. Net margin is a razor-thin 0.8% and cash on hand is almost nil at $6.3M (down 85.7%), leaving the model dependent on floor-plan financing and steady cash conversion. Earnings have been volatile and cyclical: net income ran $349M (2021) → $88.5M (2022) → $178M → $216M → $119M (2025), so 2025 looks like a down year, plausibly weighed by EchoPark and higher interest costs, with the prior-year CDK Global outage (June 2024) muddying comparisons.