Sonic Automotive, Inc. (NYSE:SAH), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$63.04 and falling to the lows of US$51.32. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Sonic Automotive's current trading price of US$55.96 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Sonic Automotive’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Sonic Automotive

Is Sonic Automotive Still Cheap?

According to our valuation model, the stock is currently overvalued by about 22%, trading at US$55.96 compared to our intrinsic value of $45.71. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Sonic Automotive’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Sonic Automotive?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 42% over the next couple of years, the future seems bright for Sonic Automotive. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? SAH’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe SAH should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on SAH for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for SAH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.