Lithia Motors stock just gave back some of its recent strength, dropping about 5% today, even though the Q2 headline was anything but soft. The company posted about US$9.8b in revenue and basic earnings per share of roughly US$11.56. That is a hefty profit print for an auto retailer that already carried a P/E of 12.5 before the move.

The emotional punch for investors is that the margin story still feels tight. Trailing net margin sits around 1.9%, which keeps every wobble in auto gross profit and finance income under the microscope. The rest of the earnings package helps indicate whether today’s selloff reflects discipline or an overreaction.

Is Lithia Motors stock genuinely inexpensive at 12.5x P/E and about 11.3% below its DCF…