CAR Group Ltd (ASX: CAR) shares have been a lucrative investment over the past 5 years.
CAR Group is one of three classified businesses listed on the ASX, along with Seek Ltd (ASX: SEK) and REA Group Ltd (ASX: REA). It provides car buying and selling services. If you've bought a used car lately, you will likely be familiar with its platform, carsales.com. In FY24, its platforms were viewed 18 billion times, with 2.6 million vehicles sold.
CAR Group is among a select group of ASX-listed businesses that have successfully expanded internationally. The company operates in North America, Latin America, and Asia, tapping into large addressable markets.
Over the past 5 years, CAR group shares have risen 117%. For the year to date, they are just 3% higher, trailing the S&P/ASX 200 Index (ASX: XJO), which is up 7% since the start of the year.
Investors may be wondering whether this is an attractive entry point. Let's investigate.
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Recent news
Last week, CAR Group released its estimated full-year FY25 results.
The company expects to deliver a solid 12% year-on-year increase in revenue of just over $1.14 billion. Management expects earnings before interest, taxes, depreciation and amortisation (EBITDA) to fall in the range of $638 million to $642 million. This is between 11% and 12% higher than the prior year.
CAR Group will officially deliver its FY25 results on 11 August.
A changing of the guard
As reported by The Motley Fool's Bernd Struben reported, CAR sales also dropped a big leadership announcement when delivering its estimated FY25 result.
CAR Group announced that CEO and managing director Cameron McIntyre was stepping down from his leadership roles.
This was a big announcement, given that McIntyre has been with CAR Group for 18 years, serving as CEO and managing director for nine of those years. He will be succeeded by current Chief Financial Officer (CFO) William Elliott, who will step into the role on 15 August.
CAR Group sales initially slid on this announcement, but have since rebounded.
What are CAR Group shares worth?
Prior to these announcements, Macquarie Group (ASX: MQG) released a research note on CAR Group shares.
In its 16 July research note, the broker described CAR Group as having a 'robust business'.
It noted that "Australia [currently supports] around 50% of earnings, which is a high quality robust business proven to grow revenues near double digits over a sustained period and has operating leverage upside to further improve earnings" and that "businesses across North America, Latin America and Asia [are] seeing growth opportunities through higher market share and with ongoing M&A likely, albeit not imminent."
However, the broker placed a 'Neutral' rating and price target of $39 on the stock.
This was mainly on valuation grounds, with Macquarie noting:
CAR is well priced trading on 34x 12m fwd. P/E, a 55% premium to the ASX300 industrials, in line with the long-run premium, and providing around 10 – 15% EPS growth (MQe = +12% three-year CAGR, FY25-28). Improving readthroughs on Trader Interactive would support a more constructive view.
Foolish Takeaway
CAR Group is one of the highest quality businesses on the ASX, with an impressive long-term share price history to show for it. However, at its current valuation, Macquarie rates it as 'Neutral'. This suggests investors should wait for a more attractive entry point before buying CAR Group shares.
