• If you are wondering whether AutoNation's share price still offers value after a strong run, or if most of the opportunity is already priced in, this article is designed to help you frame that question clearly.
• AutoNation's stock closed at US$219.08, with returns of 2.2% over the last 7 days, 4.3% over 30 days, 6.1% year to date, 18.3% over 1 year, 86.5% over 3 years and 203.1% over 5 years. This naturally raises questions about what is already reflected in the current valuation.
• Recent news around AutoNation has focused on its positioning in the US auto retail space and on how investors are thinking about the balance between used and new vehicle exposure, capital allocation and longer term demand trends. This context helps explain why the share price has been in focus for investors who are considering both opportunity and risk.
• Based on our checks, AutoNation currently has a valuation score of 4 out of 6. Next, we look at how different valuation methods line up with that score, before finishing with a straightforward way to get an even clearer picture of what the stock might be worth.

Approach 1: AutoNation Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business might be worth today by projecting its future cash flows and discounting them back to a present value. For AutoNation, this is done using a 2 Stage Free Cash Flow to Equity model that focuses on cash available to shareholders.

On a last twelve month basis, AutoNation reported free cash flow of $251.78 million outflow, so the model relies heavily on forward projections. Analysts and extrapolations point to free cash flow reaching $886 million in 2030, with a series of annual estimates between 2026 and 2035 that gradually adjust over time based on analyst inputs and Simply Wall St extrapolation beyond the usual 5 year window.

Bringing all of those projected cash flows back to today results in an estimated intrinsic value of about $230.86 per share. Compared with the recent share price of $219.08, the DCF implies AutoNation trades at roughly a 5.1% discount, which is a modest gap rather than a dramatic one.

Result: ABOUT RIGHT

AutoNation is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: AutoNation Price vs Earnings

For profitable companies like AutoNation, the P/E ratio is a straightforward way to see how much investors are currently paying for each dollar of earnings. It links the share price directly to earnings, which is usually the main driver of long term returns for shareholders.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk often line up with a lower P/E.

AutoNation currently trades on a P/E of about 12.05x. That sits below the broader Specialty Retail industry average of about 20.51x and below the peer average of roughly 13.08x, which may catch your eye if you are comparing it directly with other retailers.

Simply Wall St’s Fair Ratio framework goes a step further. It estimates what P/E might be reasonable for AutoNation given factors such as earnings growth, profit margins, its industry and market cap, and company specific risks. Because it ties the multiple to the company’s own profile rather than just broad group averages, it can be a more tailored reference point.

On this basis, AutoNation’s Fair Ratio is 15.67x, above the current 12.05x, which suggests the shares may be undervalued on earnings.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1427 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your AutoNation Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which help you connect your view of AutoNation’s business to a clear financial story.

A Narrative is simply your story behind the numbers, where you set out what you think could happen to revenue, earnings and margins, then link that to an assumed fair value for the stock.

In practice, a Narrative ties three things together: the company’s story, a forward looking forecast and a resulting estimate of fair value that you can set against today’s share price.

You can build and compare Narratives directly on Simply Wall St, inside the Community page used by millions of investors, and use them as a quick reference for whether fair value sits above or below the current price when you are thinking about buying or selling.

Because Narratives refresh when new information such as earnings reports or news is added to the platform, your view of AutoNation can evolve without you rebuilding your work from scratch.

For example, one AutoNation Narrative might assume a conservative outlook and arrive at a lower fair value, while another, more optimistic Narrative could use higher revenue and margin assumptions and land on a meaningfully higher figure.

Do you think there's more to the story for AutoNation? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.