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Asbury Automotive Group, Inc. (ABG -0.52%) has been witnessing strong earnings momentum after delivering positive earnings surprises in 10 of the last 12 quarters, with an average beat of 19%.

The automotive retailer is benefiting from a favorable brand mix and continued improvement in the U.S. automotive retail market. With a meager price-to-sales (P/S) ratio of 0.20, this Zacks No. 1 Rank ("strong buy") stock is a true value pick.

On Oct. 23, Asbury Automotive Group posted a hefty 71.4% year-over-year gain in third-quarter earnings to 72 cents per share, beating the Zacks consensus estimate by 12.5%. Revenues grew 14% to $1.2 billion.

New vehicle revenues increased 22.5% to $674.7 million, thanks to a 30% growth in revenues generated from mid-line import brands and 24% from luxury brands. Unit sales for mid-line import and luxury brands advanced 31% and 25%, respectively, due to a better inventory position and strong demand.

Asbury Automotive Group's used vehicle revenues went up 5.0% to $281.8 million in the quarter. Same-store, used vehicle unit sales rose 4%, driven by the "Asbury 1-2-1" vehicles trade-in program. This program not only boosted retail volume but revenues from associated parts and service reconditioning, as well as from the company's Finance & Insurance business.

The Zacks consensus estimate for 2012 went up 5.2% in the past three months to $2.62 per share, driven by upward revisions from all 10 estimates. For 2013, the Zacks consensus estimate of $2.91 rose 5.4% in the past 90 days and 6.2% in the past two months based on upward revisions from all 10 estimates again. The estimates for 2012 and 2013 reflect year-over-year growth of 44.1% and 11.0%, respectively.

The price and consensus chart shows that the stock is undervalued as the 2011 to 2014 estimate lines are above the price line. Furthermore, the upward shifts in estimate lines indicate that the stock has significant opportunities for growth. The stock reached its 52-week high of $32.77 on Nov. 1.

Asbury Automotive Group has strong value characteristics. In addition to a low P/S, it is currently trading at a forward price-to-earnings (P/E) multiple of 11.8 and a price-to-book (P/B) multiple of 2.5. (A P/S ratio lower than 1.0, a P/E below 15.0 and a P/B ratio under 3.0 generally indicate value.) It also has a price/earnings-to-grr03;owth (PEG) ratio of 0.54, which is less than one and indicates that the stock is reasonably valued given the expected growth of 22.0%. Moreover, the company's one-year return on equity of 22.3% is higher than its peer group average of 16.8%.

Headquartered in Duluth, Georgia, Asbury Automotive Group was founded in 1995. The $972.56 million company offers an extensive range of automotive products and services, including new and used vehicles; vehicle maintenance, replacement parts and collision repair services; and financing, insurance and service contracts. As of Sept. 30, 2012, the company has offered 28 domestic and foreign brands of new vehicles and operated 97 franchises, including 79 dealership locations in 18 metropolitan markets in 10 states.

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