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Would You Buy A Used Car From This Company? Costco Wholesale Corporation (COST), Carmax, Inc (KMX), AutoNation, Inc (AN)

Let’s check these numbers with my manager!!

Buying a car is more traumatic than it need to be, and these companies are trying to make it less stressful. It’s certainly worked for investors, and analysts like at least one of the two car auto retailers as alternatives to the traditional hard sell. Six analysts rate CarMax a strong buy, five a buy, and three a hold, but their five year EPS growth rate predictions are the lowest of these three at 12.00%. AutoNation analysts are less sanguine with 10 holds, 2 underperforms, one buy, and one strong buy. Still, they expect 18.63% EPS growth for AutoNation over five years.

Costco just reported Q2 results for FY13 on March 12, so the numbers are straight off the lot. EPS was $1.24, up 38% from last year, and total locations worldwide came to 622. The all-important renewal of memberships number stayed high: just under 90% for the US and Canada and over 85% for the rest of world, despite last year’s fee increases.

All the good news from Costco Wholesale Corporation (NASDAQ:COST) leaves it trading at a 25.22 P/E with a 1.10% yield and very close to its 52 week high of $105.97. With a PEG of 1.72 Costco is really a little hard to buy here. Let me write down the figure I’m willing to pay, at least knock it down 10% lower. Then you’d be in my neighborhood, especially considering the 13.20% five year EPS growth rate.

Let’s seal the deal!

Both Costco and CarMax are trading close to 52 week highs. Despite analyst enthusiasm for CarMax, it seems overvalued here. Costco is a great retailer and the numbers were very good, but it too is marked up. The best overall value here is Auto Nation, with its PEG of .82 and highest predicted growth rate, as well as being off from its 52 week high. That said, if the Street saw fit to put Costco on sale I’d be mighty tempted to make a deal.

COST Total Return Price data by YCharts

The article Would You Buy A Used Car From This Company? originally appeared on and is written by AnnaLisa Kraft.

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