Forget Tesla — Here's Why Lithia Motors (LAD) Might Deliver Bigger Gains in 2025

When I’m looking for growth opportunities in the market, I try to find companies that are doing something right — whether it's quietly expanding, trading at a discount, or just operating with a clear long-term strategy. Lately, I’ve been digging into Lithia Motors (NYSE: LAD), and after going over the numbers and recent developments, I’ve decided to open a position. It’s not the kind of stock that gets hyped on every finance podcast, but the more I looked, the more it made sense for my portfolio.

Valuation is usually the first thing I check, and with Lithia, that’s what initially pulled me in. Right now, the P/E ratio is sitting around 9.6. That’s below the industry average and even lower than where it’s traded historically. It immediately gave me the sense that the stock might be flying under the radar.

Even better, the PEG ratio — which compares price to earnings growth — is down around 0.51. That’s the kind of number I love to see as a growth investor. It tells me that the stock isn’t just cheap on earnings today, but it's also cheap relative to where earnings are headed.

This is similar to why I took interest in Amazon's long-term setup for 2025 — valuation matters when growth is quietly building under the hood.

If you like diving into valuations yourself, TradingView is a great tool I personally use to track ratios, price targets, and technical setups in real time.

Price-to-sales is 0.21. That’s really low. And the price-to-book is about 1.23, which means it’s not trading that far off from its actual asset value. Altogether, these numbers suggest the stock’s current price isn’t fully reflecting its potential.

Financially, the company has been doing pretty well, especially lately. In Q1 2025, revenue came in at $9.2 billion — that’s a 7% increase compared to the same time last year. EPS also grew to $7.94, which is a solid 35% jump. So not only is the company bringing in more money, but it's also getting more efficient with it.

If you're the kind of investor who cares about efficiency metrics like ROE, you might want to check out my breakdown of Return on Equity and how it shapes investment decisions. Lithia's ROE of 13.1% definitely caught my eye.

That said, free cash flow has been a bit of a weak spot. It dropped pretty sharply last year, down over 100%. But considering Lithia’s been pouring money into acquisitions and its online sales platform, I’m okay with some short-term cash flow hits as long as those moves pay off.

Lithia isn’t just another car dealership chain — they’ve built a significant footprint. Right now, they hold about 19.6% of the U.S. automotive retail market. That’s more than AutoNation and a bit ahead of Penske.

What I find interesting is how they’re combining traditional dealership growth with digital sales through platforms like Driveway and GreenCars. That hybrid strategy feels like a smart move in a market where consumer behavior is definitely shifting online. They’re not just following the trend — they’re leaning into it.

It reminds me of the conviction I had when betting big on Nu Holdings — companies that rethink traditional models often win out in the long run.

There are definitely a few things I’m watching closely. One is the drop in free cash flow, which I mentioned earlier. It’s not ideal, and I’ll want to see that bounce back.

There’s also been some insider selling — a board member sold over a million dollars in stock recently. It doesn’t necessarily mean anything bad, but I usually keep tabs on that kind of move.

Then there are macro issues like tariffs on foreign-made cars. Those could drive up prices and shift demand, especially toward used vehicles. Lithia sells both, so they might be okay, but it’s still something I’m watching.

If you’re a more cautious investor who prefers passive income strategies, I wrote about some monthly dividend stocks for steady income — might be worth a look if LAD’s volatility feels like too much.

Also, if you want a high-level snapshot of your entire portfolio performance, Personal Capital (now Empower) is a great free tool I use to stay on top of allocations and cash flow tracking.

The sector overall isn’t red-hot, but it’s not cold either. Growth is expected to be about 7% annually through the next decade, which is decent. EV adoption, digital transformation, and changing consumer habits are all driving that. For a company like Lithia that’s actively investing in all of those areas, I think the backdrop is actually supportive.

In a way, this reminds me of how I analyzed Arista Networks’ growth in 2025. It’s not always about explosive momentum — sometimes consistent, strategic execution matters more.

So yes — I’ve decided to start a position in LAD. I’m not going all in, but I’m building a spot in my portfolio for it and I’ll be watching a few key things over the next few quarters.

I want to see how they do on free cash flow and whether the acquisitions they’re making actually drive margin growth. I’m also curious how their online platforms perform — if they can start becoming a meaningful revenue contributor, that could be a nice upside surprise.

For anyone starting out or looking to invest small amounts easily, Acorns is one of those tools I recommend for auto-investing and rounding up spare change.

To me, LAD looks like one of those stocks that isn’t getting enough credit. It’s trading at a discount, it’s expanding in a smart way, and it’s got decent momentum behind it. It’s not without its risks — but I’m okay with those.

If you’re more into big tech plays, you might enjoy my analysis on Google’s investment setup in 2025 or why Nvidia might be too expensive despite the hype. But if you're looking for something more under-the-radar, Lithia might be worth a spot on your watchlist.

I’m in — and I’ll be watching closely to see how the story plays out from here.

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