Investors are being treated to a tonne of stock ideas from some of the biggest names in funds management today. One of those ideas is an ASX 200 share that has dragged 13% lower this year despite accelerating its earnings.
Auscap Asset Management's portfolio manager, Tim Carleton, named his pick from the field today at the Sohn Hearts and Minds 2022 conference in Hobart.
Unlike some of the other guest speakers, Carleton looked locally for his prized pitch for outperformance. The astute fund manager drew the crowd's attention to a highly profitable ASX-listed company that could be set to put the pedal to the metal on future growth.
Which ASX 200 share is this expert's top pick?
Before I 'exhaust' the automotive puns — the Auscap fundie revealed Carsales.com Ltd (ASX: CAR) as his number one selection. Rather than being deterred by the underperformance compared to the S&P/ASX 200 Index (ASX: XJO) year-to-date, Carleton was emboldened by it.
Speaking to the value opportunity present in Carsales, the Auscap manager said:
We've seen a lower share price as a result of broad market movements. These are the sorts of opportunities that we love and it offers a compound earnings growth story with an attractive valuation.
Carleton admitted it might seem odd to describe the automotive online marketplace as a value play. After all, the current price-to-earnings (P/E) ratio hovers around 47 times.
This might seem almost extortionist compared to a peer average P/E of approximately 35 times earnings. Yet, the experienced fund manager explained that the company's broad geographic exposure to areas outside of Australia represented a "massive opportunity".
Not cruising alone on this one
It seems Carleton is in good company with his attraction to this ASX 200 share. Both Wilsons and Alphinity — two prominent Australian fund managers — have sung the praises of Carsales recently.
Furthermore, the Auscap portfolio manager pointed out Carsales' history of growing earnings per share (EPS). Looking at how the company's EPS has performed since 2019 (below), it's hard to argue with the statement.
Further fuelling the bull case, Carsales is one company that hasn't reduced its dividends since making its first payment. Since 2010, the company's dividends have grown at a compound annual growth rate (CAGR) of 10.6%.
This ASX 200 share currently trades at $21.66 apiece — gaining 13.2% in the last month.
