Is Carsales.Com a buy at this share price?

Credit: Dmitriy

The share price of online automotive classifieds advertiser Carsales.Com Ltd (ASX: CAR) has put in a solid performance over the past 12 months.

The stock has gained around 13% which is a significant outperformance compared with the 11% fall in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

The longer-term performance of the company is even more impressive.’s share price has increased by 132% and 193% over five and ten years respectively. In comparison, the index has gained just 11% and 12.5% over the same time periods.

With a track record such as this, is definitely a stock long-term investors might want to gain a better understanding of.

Here are four reasons why the future remains bright for Carsales.Com.

  1. Clear market leader –’s domestic site is by far the leading choice for both buying and selling new and used cars. According to a recent presentation by the firm, its website is 4 times more popular than its closest competitor for buying new and used cars.
  2. Adjacent business expansion – is cleverly positioning itself to capture a greater “share of wallet”. By expanding into other automotive related fields such as tyre sales and car financing the total spend of customers can increase.
  3. International expansion – not only does have a strategic 20% shareholding in listed Asia-focussed online auto classifieds site owner iCar Asia Ltd (ASX: ICQ) but the group also has exposure to growth markets in Mexico and South American too.
  4. Reasonably priced – according to Thomson Consensus Estimates, is forecast to increase earnings per share (EPS) from 41.5 cents per share in financial year (FY) 2015 to 58.3 cps in FY 2018. This forecast implies EPS growth over the next three years totaling 40.5%. Based on the forecast for FY 2016, the price-to-earnings ratio is 25 times. That’s a reasonably hefty multiple, however, if the group meets market expectations then it is arguably justified.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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