The Carsales.Com Ltd (ASX: CAR) share price could be a buy with the CEO planning more international growth.
Many readers would be familiar with Carsales, the online car portal where private owners or car dealerships can sell cars. It also owns a number of leading car sites in South America, Central America and Asia.
The company reported a solid set of financials in 2018. Reported revenue grew by 19% to $444 million, reported earnings before interest, tax, depreciation and amortisation grew by 16% to $205 million and 'adjusted' net profit after tax (NPAT) went up 10% to $131 million.
Based on Carsales' FY18 look through summary, international revenue grew by 53.6% in FY18 and made up 15.8% of total revenue. International EBITDA did even better, growing by 75.7%, but it was only 12.4% of total EBITDA.
If international revenue can continue to grow at a strong pace, along with technology improvements and implemented efficiencies, then it could become a much bigger part of Carsales' business.
The AFR has quoted Carsales CEO Cameron McIntyre as saying the international segment could contribute more than half of total earnings eventually.
There are challenges, opportunities and advantages with the international division.
A challenge is that each market is at a different stage of development and there are also country-specific issues, meaning the company can't use the exact same strategy in every location.
However, Carsales does have a market-leading portal and systems in Australia that it can use as a blueprint for the other countries. The scale of the opportunity is enormous for Carsales considering the human and car populations of the other countries it's operating in are far greater than Australia, yet the digital usage is much lower currently.
Carsales has a big opportunity with its international markets where it can grow organically, which should lead to higher profit margins over time.
Foolish takeaway
Carsales is currently trading at 21x FY19's estimated earnings with a grossed-up dividend yield of 5.3%. With the fall in the share price from above $15 a few months ago to today's price of around $12 I think Carsales could be worth considering for your portfolio.
