January 16, 2021

NASDAQLMPX

The big shareholder groups in LMP Automotive Holdings, Inc. (NASDAQ:LMPX) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes “a business with enduring competitive advantages that is run by able and owner-oriented people.” So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

With a market capitalization of US$221m, LMP Automotive Holdings is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have not yet purchased much of the company. We can zoom in on the different ownership groups, to learn more about LMP Automotive Holdings.

View our latest analysis for LMP Automotive Holdings

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ownership-breakdown

What Does The Institutional Ownership Tell Us About LMP Automotive Holdings?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Institutions have a very small stake in LMP Automotive Holdings. That indicates that the company is on the radar of some funds, but it isn’t particularly popular with professional investors at the moment. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

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earnings-and-revenue-growth

We note that hedge funds don’t have a meaningful investment in LMP Automotive Holdings. The company’s CEO Samer Tawfik is the largest shareholder with 39% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 1.9% and 1.6%, of the shares outstanding, respectively. Interestingly, the third-largest shareholder, William Cohen is also a Lead Director, again, indicating strong insider ownership amongst the company’s top shareholders.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of LMP Automotive Holdings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Most consider insider ownership a positive because it can indicate the board

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Quick Take

LMP Automotive (LMPX) went public in December 2019, selling 2.645 million shares at $5.00 per share.

The firm has created an online platform and logistics network for selling or renting of automobiles in the United States.

LMPX may need to take a breather while the firm absorbs the Atlantic deal and we see further guidance going forward, so I’m Neutral on the stock at the current level.

Company

Plantation, Florida-based LMP was founded in 2016 to develop an online and offline automotive retail platform that enables the selling, renting, subscribing and financing of pre-owned and new automobiles.

Management is headed by Chairman, President, and CEO Samer Tawfik, who has been with the firm since 2016 and was previously founder and Chief Executive Officer of Telco Group.

LMP describes its business model as “Buy, Rent or Subscribe, Sell and Repeat,” where the company purchases pre-owned vehicles through auctions or directly from dealers and new automobiles at fleet rates from manufacturers and manufacturer distributors.

The company then either rents automobiles to customers or allows them to opt for a subscription plan for vehicles with a minimum usage of 30 days.

LMP then sells its inventory, including vehicles used for rentals and subscriptions, and hopes to repeat the same process again, as shown below:

Source: Company registration statement

Additionally, the firm provides the option to extend automotive warranties and schedule deliveries and pick-ups, typically through third parties.

Management’s expectations are over 90% of the firm’s fleet to be rented or subscribed and in use with the capabilities to support 1,000 customers using the company’s current facility.

Recent Performance

LMPX’ topline revenue by quarter has grown markedly since the firm’s IPO:

Gross profit by quarter has also grown according to a similar trajectory:

Operating income by quarter remained negative until the most recent reporting period, Q2 2020:

Earnings per share (Diluted) swung into positive territory in Q2 2020:

Source for chart data: Seeking Alpha

Since its IPO, LMPX’ stock price has risen 392 percent vs. the U.S. Specialty Retail index’ rise of 20.5 percent and the overall U.S. market’s growth of 18.7 percent in the past twelve months, as the chart below indicates:

Source: Simply Wall Street

Valuation Metrics

Below is a table of relevant capitalization and valuation figures for the company:

Measure

Amount

Market Capitalization

$267,200,000

Enterprise Value

$256,780,000

Price / Sales

14.38

Enterprise Value / Sales

15.01

Enterprise Value / EBITDA

-152.57

Free Cash Flow [TTM]

-$14,700,000

Revenue Growth Rate

-0.75%

Earnings Per Share

-$0.30

Source: Company Financials

As a reference, a relevant public comparable to LMP would be Carvana (CVNA); shown below is a comparison of their primary valuation metrics:

Metric

Carvana (CVNA)

LMP Automotive (LMPX)

Variance

Price / Sales

6.98

14.38

106.1%

Enterprise Value / Sales

3.14

15.01

377.3%

Enterprise Value / EBITDA

-57.59

-152.57

164.9%

Free Cash Flow [TTM]

-$886,940,000

-$14,700,000

-98.3%

Revenue Growth Rate

42.2%

347.0%

722.9%

Source: Seeking Alpha

Commentary

In its last earnings call, covering Q2 2020’s results, management highlighted its record topline growth

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