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Is the Carsales.Com Ltd (ASX:CAR) share price a buy?

The Carsales.Com Ltd (ASX: CAR) share price is down 15% over the past month and it’s conducting its AGM today, I think it’s worth considering if the online car marketplace business is a buy.

However, FY18 was a strong year, total revenue grew by 19% to $444 million. There was more to that result than the headline figure. The Online Advertising division grew revenue by 10%, but it was the other segments that were particularly pleasing.

Finance and Related Services revenue went up 24% to $68.4 million, Carsales Asia grew revenue by 778% to $29.9 million and Carsales Latin America revenue went up 68% to $8.2 million.

All of those divisions are significantly smaller than the main segment, but they could become large contributors over time if they keep growing.

It was a similar story at the earnings before interest, tax, depreciation and amortisation (EBITDA) level. Total EBITDA grew by 16% to $204.6 million, but Online Advertising EBITDA grew by 9% to $156.1 million and Carsales Asia EBITDA grew by 953% to $15.8 million. It wouldn’t be as impressive without the SK Encar acquisition, however total EBITDA would still have gone up 8%.

Outlook

Management said that the domestic core business remained solid in the first quarter of FY19. The company said that assuming market conditions are stable, it expects moderate revenue, EBITDA and net profit after tax (NPAT) growth, with a stronger second half.

For its international segment, Carsales described the overall performance in the first quarter as good. It expects “solid” local currency revenue and earnings growth in Brazil, South Korea and Chile. Management believe that the Mexico and Argentina divisions will experience good revenue growth with the integration of the core Carsales IP and technology.

Foolish takeaway

Carsales is trading at under 21x FY19’s estimated earnings, with a grossed-up dividend yield of 5.1%. The international divisions of Carsales are interesting and that is what would attract me to make an investment. However, I have my eyes on other tech shares at the moment.

For example, this top tech share doubled its profit last year and has a lot more growth planned.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. 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 Scott Phillips.

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