Is the Bapcor share price a buy in the current ASX correction?

The Bapcor Ltd (ASX: BAP) share price is dropping sharply today, caught up in the wider ASX sell-off. Does this offer a good buying opportunity for brave investors?

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The Bapcor Ltd (ASX: BAP) share price is dropping sharply today, caught up in the wider ASX share market selloff. At the time of writing, Bapcor shares are trading 6.34% lower at $5.02 while the S&P/ASX 200 Index (INDEXASX: XJO) is down by a massive 5.60%.

So, does the current market sell-off offer a good buying opportunity into Bapcor for brave investors?

Recap of the Bapcor story

Bapcor is the largest and leading second-hand car parts distributor in Australia and New Zealand. The company has a number of brands under its umbrella including Burson, Autobarn and Autopro. Recent acquisitions include Truckline and Diesel Drive which are part of Bapcor's expansion into the Japanese and Australian wholesale markets.

Bapcor is also expanding into Thailand, which should provide the company with a useful launching pad for further expansion into Asia.

Bapcor recently added a further 35 new stores and branches to its network and has now passed the 1,000 location milestone across its local and international operations.

Solid recent financial performance

In its recent 1H20 results, Bapcor posted a healthy 10.4% increase in revenue to $702.5 million and a 5.1% increase in net profit to $45.3 million.

Bapcor's revenue growth is being driven by recent acquisitions and the rollout of new stores. Despite this, growth has slowed down to some extent on recent years, driven by the greater scale of its overall business in its Australian and New Zealand divisions. However, I think that this slowdown was always to be expected.

In the most recent half, Bapcor suffered margin falls for first time since the listing on the ASX. This was due to the challenging wider economic environment as well as strong competition, especially in the trade businesses in Australia and New Zealand. Additionally, the weakening Australian dollar also had a negative impact.

I think these results disappointed investors which would explain the fall in the Bapcor share price after the announcement of the results in early February. Of course, a significant part of Bapcor's more recent share price decline has been triggered by the wider market sell-off.

Bapcor noted that its overall performance is in-line with expectations and, on a positive note, its same-store sales growth continued into January. Bapcor also pointed out that its new Truckline division is not expected to grow earnings until FY21, so that should provide a positive boost to earnings in the years to come.

Foolish takeaway

I think that Bapcor shares have been sold off too harshly recently by investors in relation to its recent financial performance. Although Bapcor's half-year report was a bit disappointing in a few areas, I believe the results demonstrate that the fundamentals of the business are very solid.

In combination with the sell-off from the current ASX share market correction, I think this gives patient long-term investors an opportunity to purchase a high-quality Australian investment with a promising future ahead of it at a much more favourable price.

Motley Fool contributor Phil Harpur owns shares of Bapcor. 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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