Yahoo Finance At AU$23.11, Is carsales.com Ltd (ASX:CAR) Worth Looking At Closely?
carsales.com Ltd (ASX:CAR), is not the largest company out there, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$23.76 and falling to the lows of AU$21.45. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether carsales.com's current trading price of AU$23.11 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at carsales.com’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for carsales.com
What's The Opportunity In carsales.com?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17.30% above my intrinsic value, which means if you buy carsales.com today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is A$19.70, there’s only an insignificant downside when the price falls to its real value. Furthermore, carsales.com’s low beta implies that the stock is less volatile than the wider market.
What does the future of carsales.com look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for carsales.com, at least in the near future.
What This Means For You
Are you a shareholder? Currently, CAR appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on CAR for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on CAR should the price fluctuate below its true value.
So while earnings quality is important, it's equally important to consider the risks facing carsales.com at this point in time. To that end, you should learn about the 4 warning signs we've spotted with carsales.com (including 2 which are significant).
If you are no longer interested in carsales.com, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
