Just under a year ago, I wrote about Carsales.com (now called CAR Group, ASX: CAR). At the time, its share price was $21.90, and it was completing a $500 million capital raising at $19.95 per share to take its ownership of Webmotors in Brazil from 30% to 70%. On Friday, its shares closed at $34.64, although they have been as high as $36.77 this year.
After such a strong gain, is there any value in CAR Group, the third biggest company in the S&P/ASX All Technology Index?
CAR Group (CAR) – 3/19 to 3/24

Source: nabtrade
Founded in 1997, CAR Group operates digital car marketplaces. It is the number one operator in Australia with carsales.com and has a growing presence in the United States, Asia, and Latin America. Carsales.com also operates a number of market leading websites in non-automotive verticals including motorcycles, boats, caravans, trucks, and heavy machinery.
CAR Group has five major operating segments:
- Australia – the leading digital car marketplace with carsales.com, which accounts for 42% of the Group’s revenue. Dealers contribute about half the revenue, private buyers about 25%, with the balance coming from media and data and research services.
- United States – through Trader Interactive, which provides marketplaces for RVs and commercial vehicles, approx. 25% of group revenue.
- South Korea – through Encar, approx. 11% of group revenue.
- Brazil – through Webmotors (70% owned), approx. 16% of group revenue; and
- CAR Group investments – through adjacent investments in companies providing inspections and tyre services – approx. 6% of group revenue.
In the first half of financial year 2024 (period ending 31 December 2023), CAR Group reported revenue growth of 18% (on a proforma basis) to $531 million and earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 19% (on a proforma basis) to $277 million. Net profit after tax (NPAT) for the period rose by 72% to $117 million.
CAR Group has delivered year-on year-revenue increases in each of the last 15 years, growing at a compound annual growth rate (CAGR) of around 15%. Over the last 5 years (taking data from the first half), revenue has grown at a CAGR of 13%, EBITDA at 14%, adjusted net profit at 27% and EPS (earnings per share) at 15%.

Perhaps one of the most impressive parts of the CAR Group business is that it’s a very high margin business. Overall, it keeps 52.2 cents of every dollar of revenue (before interest, tax, and depreciation). In Australia, the margin is even higher at 64.2%.
Its strategy is based on market leadership in digital classified advertising markets of material size, building a compelling ecosystem of services that support customers through the buying, selling and ownership of vehicles, and leveraging consumer insights and industry trends to explore new opportunities. This is enabled by data analytics, people, and technology.

Key priorities include increasing the digitisation of the vehicle buying and selling process, delivering value for sellers through new premium depth products, connecting advertisers to its audience through sophisticated data products and developing opportunities in new markets and adjacencies (for example, the boat market in the USA).
In overseas markets, it has typically used an entry strategy where it acquires a small stake in a target operator, before moving to majority control once satisfied that the opportunity can be leveraged. CAR Group originally acquired a 30% interest in Webmotors in 2013, the leading online auto marketplace in Brazil which is the world’s fifth largest market for automotives. In 2023, CAR Group acquired an additional 40%, taking its ownership to 70%.
Looking ahead, CAR Group says it expects to deliver “good growth in revenue and EBITDA in FY24 on a proforma basis”, “very strong growth on an actual basis in revenue and adjusted EBITDA” and an expansion on the Group’s EBITDA margin. Growth (revenue and EBITDA) in all marketplaces is either “good” or “strong”, except private listings in Australia where “solid” growth is expected.
What do the brokers say?
While the brokers are positive on the company and its growth outlook, they are concerned about the valuation. Ord Minnett’s “lighten” and Macquarie’s “neutral” are largely based on valuation.
According to FN Arena, the consensus target price is $34.02, 1.8% lower than Friday’s closing ASX price of $34.64. The range of target prices according to FN Arena is a low of $26 from Ord Minnett (Morningstar) through to a high of $40 from Morgan Stanley.

On multiples, the brokers have CAR Group trading currently at 42.3 times forecast FY24 earnings and 36.9 times forecast FY24 earnings. Its prospective dividend yield is around 2% (with franking at 50%).
What’s the bottom line?
There’s no doubt that CAR Group is trading on an elevated valuation, particularly compared to historical levels. But it’s a company that keeps on delivering and has demonstrated ongoing growth. And when compared to the number 1 tech company in Australia, WiseTech (WTC), which is trading on a multiple of 85 times forecast FY25 earnings, CAR doesn’t look that expensive!
Portfolio holders should hold on and let their profits run. Investors that haven’t had a look at CAR might want to mark it on their watch list and wait for a pullback, but my sense is not to wait too long. CAR Group is still driving ahead.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.