Carsales.Com Ltd (ASX: CAR) had a strong day on the markets yesterday after releasing its full-year result. In fact, the Carsales share price jumped 4.2% higher to a new all-time high.
Despite the strong gains, however, I still like the look of Carsales over the next 12-24 months.
What did Carsales report yesterday?
The Aussie online classifieds business reported a solid result, especially in the context of the current climate.
The group reported adjusted revenue up 1% to $423 million with good growth in Australia and South Korea.
Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 6% to $237 million, with an EBITDA margin of 55%.
Adjusted net profit after tax jumped 6% to $138 million despite reporting a 9% decline in statutory profit to $120 million.
The Carsales share price surged higher following the result to a new all-time high of $20.29 per share before edging back to its current price of $20.23. That means shares in the Aussie business are up 20.5% this year compared to a 7.8% decline in the S&P/ASX 200 Index (ASX: XJO).
Why I like the Carsales share price
The latest full-year result shows that the Carsales business is resilient despite the tough economic conditions.
The coronavirus pandemic continues to weigh on earnings and make it difficult to forecast beyond this year.
However, I think that economic uncertainty may have a silver lining for Carsales. The recent goverment stimulus measures have seen an increase in vehicle purchases as many Aussies splash out with their new dollars.
While the stimulus may subside, I think many will still look to sell vehicles that they now can’t afford, or look to buy second-hand to save some cash.
That’s good news for the Carsales share price which could benefit from increased volumes.
On top of that, we’re also seeing a change in work and commuting dynamics. That means more Aussies could move out of inner city areas and require a car for travel. We could also see a move away from public transport to reduce the danger of contracting COVID-19.
Finally, I think the strong momentum behind the Carsales share price is a good thing for investors. It won’t last forever, but I think it may continue to climb beyond its current all-time high in 2020.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. 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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