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Is the Bapcor (ASX:BAP) share price a buy?

At least two experts think the Bapcor Ltd (ASX: BAP) share price is a buy.

An overview of Bapcor

According to the ASX, Bapcor has a market capitalisation of around $2.4 billion.

Bapcor is the largest auto parts business in Australasia. It has a variety of businesses. Burson Auto Parts provides parts quickly to mechanics across the country. It has a variety of wholesale specialist businesses including AAD, it also recently acquired the Commercial Truck Parts Group which provides parts for light and heavy commercial trucks. It has a retail segment with its key business being Autobarn. Bapcor has service businesses such as Midas and ABS. Finally, the company has a growing presence in Asia, with a network in Thailand.

Recent trading update

The company recently gave a trading update about how it performed in the first quarter of FY21.

It reminded investors that government restrictions were imposed in Victoria and Auckland which had a negative impact on trading operations in those places. However, despite those impacts, Bapcor said its businesses have continued to perform extremely well.

Burson Trade revenue was up 10%, with same store sales growth of 7.7% – it was up 17% excluding Victoria. New Zealand revenue grew by 6% on same store sales growth of 4%. Retail revenue soared 47% higher, with Autobarn same stores sales going up 36%. Finally, specialist wholesale revenue went up 45%, though excluding acquisitions revenue went up 18%. Overall, group revenue went up by 27%.

Bapcor CEO Darryl Abotomey commented in the company’s trading update about the company’s defensive qualities: “The automotive market is a resilient industry and historically has performed strongly in difficult economic circumstances. Recent trading is another example of its resilience assisted by the increase in sales on second hand cars, reduction in use of public and shared transport modes as well as government stimulus. We envisage that the impacts of COVID-19, including the expected increase in domestic tourism and increased use of vehicles and will continue to drive the Bapcor businesses.”

What the experts think of the Bapcor share price

The WAM investment team at WAM Capital Limited (ASX: WAM) said that Bapcor has benefited from an increase in domestic travel, reduced usage of public transport and increased second-hand car sales. WAM Capital said the ASX share has a strong balance sheet and it believes it’s well placed to make earnings accretive acquisitions.

At the end of October 2020, Bapcor was one of the 20 largest positions in the WAM Capital portfolio.

The Motley Fool Dividend Investor rates the Bapcor share price as a buy. The team recently commented on Bapcor’s trading update, with the following commentary:

“Bapcor’s business tends to show strong resilience even in weak economic environments, and the last few months have shown that is again the case. Its strong sales are — in part — thanks to the increase in sales of second hand cars, reduction in public transport and government initiatives such as Job Keeper and other support packages.

A reason for the strong first quarter is pandemic-related and, for this reason we think it would be a mistake to extrapolate future performance based on the growth rates of the last few months. Nevertheless, it is pleasing to see the company is capitalising on current tailwinds within its industry.

According to Commsec estimates, at the current Bapcor share price it’s trading at under 18x FY23’s estimated earnings. Bapcor currently offers a trailing grossed-up dividend yield of 3.5%.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. 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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