The lacklustre performance of leading online automotive classifieds advertiser Carsales.Com Ltd (ASX: CAR) over the past year could have created the situation whereby the stock is now trading at a level more in line with its fair value.
With a dominant market position and some exciting overseas growth opportunities including a 20.2% shareholding in iCar Asia Ltd (ASX: ICQ), now could be a good time for long-term investors to take a closer look at the company.
Here are some of the key takeaways from the recent Annual General Meeting (AGM):
- Shareholders were reminded that financial year 2015 was another record profit and underlying earnings per share increased 4% to 41.7 cents per share
- Domestic revenues showed growth across all divisions and in total jumped 33% thanks to the inclusion of the acquired Stratton Finance business
- The Stratton acquisition is just one of a number of ways in which management is seeking to broaden the group's revenue footprint. Other recent initiatives include the acquisition of a 20% share in peer-to-peer financier Ratesetter and the acquisition of a 50% stake in mobile vehicle inspection and verification firm Auto Inspect.
- Revenues and earnings from Carsales.Com's Asian businesses were also pleasing, while the Latin American business saw a rise in revenues but a decline in earnings.
Performance Outlook:
Perhaps the most important takeaway from the AGM was management's comments on the outlook for the group…
- Management affirmed that domestic trading performance in the first quarter was solid and that they expect this to continue throughout the first half assuming market conditions remain unchanged
- Affirmed that the domestic business remained well positioned for continued growth through the medium to long term
- Affirmed that a further update on domestic market conditions and performance would be provided at the interim results in February 2016
- Affirmed that solid progress was being made in the development of the Brazil and South Korea businesses and that the group remained well positioned for medium to long-term growth in these markets
With the stock trading on a forecast price-to-earnings ratio of 21x which is only slightly ahead of its peer group and the wider market, arguably now could be an opportunity to acquire a high quality, market leader at an attractive price.
