CAR Group Ltd (ASX: CAR) is an ASX 200 company that has seen its share price stumble in recent months.
It has fallen more than 20% since August, and could now be a quality buy-low candidate.
It is the company behind popular online marketplace carsales.com.au.
After launching in Australia, the company has diversified its exposure away from an Australian auto-classifieds platform to servicing non-auto verticals across geographies.
It now operates digital marketplace businesses in South Korea (Encar), the United States (Trader Interactive) and Chile (chileautos).
The team at Bell Potter released a new report on the ASX 200 stock yesterday.
It reiterated its buy recommendation and has a positive view on the company including a price target indicating more than 30% upside.
Here's what the broker had to say.
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Open roads ahead for Car Group
The broker is optimistic on the company's ability to generate cash flow thanks to its global network of platforms.
We recently initiated on the company with a positive view based partly on a platform enhancement roadmap designed to drive value from its market-leading networks.
Bell Potter highlighted several growth initiatives for CAR, including:
- Expanding consumer-to-consumer (C2C) payments in Australia, which will bring more transactions onto its platform.
- Introducing a pay-per-lead model in North America's marine segment, aiming to capture additional market share.
- Pursuing geographic expansion and improved lead-nurturing capabilities in Latin America.
- Enhancing CAR's dealer CRM systems to help dealers more effectively buy, manage and sell vehicle inventory.
Additionally, Bell Potter believes the company's dealer subscription revenue model can help insulate against volume/price fluctuations of product listings.
Discounted valuation compared to peers
Yesterday's report also noted that the current share price is compelling value.
It said Car Group continues to screen favourably on a risk-adjusted return basis when considering the stability of earnings growth against comparable ASX-listed classifieds platforms REA Group (ASX: REA) and SEEK Limited (ASX: SEK).
Based on this guidance, the broker has a buy recommendation on this ASX 200 company.
It also has a price target of $42.20.
This indicates an upside of 30.32% from yesterday's closing price of $32.38.
CAR's current share price reflects a 12mth fwd P/E of ~28x, a two-year low; we feel this misses the underlying investment case for CAR heading into a period from 1H27 onwards from margin headwinds rolling off into an accelerating adj. EPS growth profile.
