On April 1 2010 the Carsales.com Ltd (ASX: CAR) share price closed at $5.22 and it trades for $13 today to deliver investors some reasonable total returns when you consider it has also paid some healthy dividends over the past 9 years.
In fact over fiscal 2018 alone it paid 44.2 cents per share in dividends alone, plus full franking credits to investors.
Carsales also possesses a strong market position in Australia in that it only has a couple of competitors in the online automobile classifieds space as buyers and sellers are naturally drawn to the website that has the most cars for sale.
This phenomenon is known as a 'network effect' that also benefits the likes of online websites SEEK Limited (ASX: SEK) and REA Group Limited (ASX: REA).
In its end of February 2019 portfolio update professional fund manger Yarra Capital Management also revealed that it is retaining an 'overweight' rating on Carsales shares.
On its position the fund manager wrote: "We continue to see CAR's valuation – at a forward P/E of 22.1 times – as supportive when considering the company's outlook for long term earnings growth, its conservative accounting (with low capitalisation of research and development investment) and its undervalued international businesses."
The Carsales valuation came off the boil after its February 13 2019 interim profit report came in lower-than-expected and saw the stock close at just $11.52, however, since then it has steadily climbed to hit a multi-month high of $13 this afternoon.
As such a window of opportunity to snap up Carsales shares at a discount over the last two months may have come to a close.
However, if you take a long-term view and believe Carsales has a sustainable competitive position and pricing power despite rising competition from the likes of Facebook's Marketplace then the stock may still offer good value.
