Many people visit these websites every day. Possibly you have used them yourself or at least know of these two online businesses – Carsales.Com Ltd (ASX: CAR) and SEEK Limited (ASX: SEK). Each has risen strongly in recent years, becoming the market leaders in their fields.
They bypassed the traditional print media leaders like Fairfax Media Limited (ASX: FXJ), which used to control the lion's share of classified ads for new or used cars and job listings, and set up their own markets. Both are successful companies and attractive growth stocks.
Yet if you had to choose between the two stocks, which should buy? Which company could give you the better overall return over time?
Earnings Growth
First, if you compare past earnings per share (EPS) growth, both have risen steadily with no losses. That's great to see! However, in the past five years, which has been growing earnings the most?
In the table below, you can see Carsales.Com started out strongly with almost 32% growth in financial year 2011. SEEK on the other hand had a more average gain. Along the way, though, SEEK's growth has been trending up, while Carsales.Com has trended down.
Annual Earnings Per Share
| (cents) | 2010 | 2011 | 2012 | 2013 | 2014 |
| SEEK | 26.6 | 28.9 | 30.6 | 40.9 | 49.5 |
| % change | 8.65% | 5.88% | 33.66% | 21.03% | |
| Carsales.Com | 18.5 | 24.4 | 30.5 | 35.2 | 40 |
| % change | 31.89% | 25.00% | 15.41% | 13.64% | |
Data Source: Morningstar
SEEK seems to be pulling ahead, so perhaps it is better for growth. Both companies are expanding in Asia, acquiring and investing in established companies covering different countries in the region, so that race will continue. For now, SEEK wins this round.
Dividend yield and growth
Currently, SEEK pays a 2.1% yield fully franked, whereas Carsales.Com offers a bit more at 3.2% fully franked. Analysts' forecasts for dividend growth over the next several years have SEEK expecting about 15% annually. Carsales.Com's projected growth is about 11% annually. At present, Carsales.Com is ahead, but dividend growth over a number of years could have SEEK out front due to higher EPS growth. That makes me lean toward SEEK as better for future dividend income.
