Peter Warren Automotive (ASX:PWR): When will be its time to shine? Maybe it will be 2026 (if the market recovers)

Peter Warren Automotive (ASX:PWR) has not had the best tenure on the ASX with its market cap of <$300m – a far cry from its all time peak of >$500m. But after bottoming out in March 2025, shares have been on the upwards ever since. And while its performance has lagged its peers, we think there could be reasons for optimism.

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Overview of Peter Warren Automotive

As is the case with many car dealership companies, this one is named after its founder who opened his first yard in 1958 near Liverpool station in South West Sydney. For the first 8 years the company only sold Volkswagens but got into Ford by acquiring a franchise in Fairfield in 1966.

Since 1979, Peter Warren Automotive has operated out of a site in Warwick Farm (13 Hume Highway for those wondering) where it remains headquartered to this day and is one of the largest parts distribution centres in Sydney. It has a replica Harbour Bridge there, which it erected in the 1980s. The 21st century saw it enter luxury car brands including Mercedes-Benz and Jaguar and its expansion has continued since its listing.

As of mid-2025, the company reportedly operates “80+ franchise operations” and represents over 30 OEM brands across “volume, prestige and luxury” segments and it is in NSW, Queensland and Victoria.

A turbulant time since listing

In the first 3 years since listing, it grew revenues from $1.6bn to $2.5bn, although revenues have stagnated since then. It has always been profitable on an underlying basis, although the past couple of years have seen a significant decline – the underlying pre-tax profit was $22.3m in FY25 having been $56.8m the year before.

The car market has been volatile since the pandemic. Initially there was a shortage of new cars and a boom in demand for used cars given supply chain disruptions. Dealers who could source good used cars or accepted trade-ins often reaped outsized profits. But as the world re-opened supply improved, used cars sales dropped and it became a buyers’ market. This has persisted to this day.

As new-car supply normalised and used-car prices declined, PWR lost much of the pricing advantage — reducing profitability from used-car margins. Moreover, rising interest rates and cost-of-living pressures have reduced consumer appetite for discretionary big-ticket purchases. This affects both new and used vehicle demand.

Turbulant even compared to its peers

PWR is not the only company to face this. But it has underperformed even relative to peers such as AP Eagers (ASX:APE). PWR is a smaller outlet and has a smaller margin (just 0.8% PBT in FY25). All dealerships face pressure from rising floor-plan interest costs, rising inventory carrying costs, slower turnover. But PWR is more exposed – with its smaller scale and thinner margins, any increase in costs or drop in sales hits profitability harder.

Smaller scale also means PWR has less negotiating leverage with OEMs or vendors, weaker ability to absorb inventory carrying costs, and more sensitivity to interest rates or macro-economic headwinds.

What does the future hold?

Now, things are not that bad. It is trading ahead of its NTA per share considering it has $229m ($1.42 per share) in owned property. While it has $46.7m net debt, this figure has come down. It paid 5.6c per share dividends in FY25 and managed to reduce its costs by $4.9m between the first and second halves of the year.

Peter Warren has told shareholders its vision is to be the most valued automotive group. It has four key pillars: Innovation (by adopting new technologies), Customer focus (in digitising processes and enhancing. the customer-centric culture), Growing organically and growing by M&A. The company wants to strategically by new brands but also stand out through offering best in class service, parts and cars.

We think a key concern has been that the company is not growing organically, a fear that has impacted other companies and prevented their growth. A clear pivot in the industry is to electric vehicles, but growth is not going as fast as before. Key will be hybrid vehicles and this is where PWR can specialise.

What does FY26 hold?

In FY26, Peter Warren’s management has promised earnings growth, but not been specific. Consensus estimates see growth too, but particularly in the bottom line. For FY26, they call for $2.54bn in revenue (up 2%) but for $0.12 EPS, implying a $20.6m profit (up 70% from FY25’s post-tax profit). Then in FY27, $2.6bn revenue (up 2%) and $0.16 EPS, implying a $27.5m profit and 33% growth if FY26 figures were realised.

Analysts’ mean target price is $2.11, 21% above the current price. The company is at a P/E of 10.9x and a PEG of 0.33x.

In our view, there is potential to re-rate if the company can achieve this. But it is easier said than done and a lot will depend on the car market reinvigorating. And this in turn will depend on where interest rates go.

We think PWR is one to watch, but not necessarily one to buy right now – albeit less of a risk than companies like Star (ASX:SGR).