At AU$17.63, Is It Time To Put carsales.com Ltd (ASX:CAR) On Your Watch List?

While carsales.com Ltd (ASX:CAR) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$22.10 at one point, and dropping to the lows of AU$17.07. 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$17.63 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.

Check out our latest analysis for carsales.com

What is carsales.com worth?

Good news, investors! carsales.com is still a bargain right now. My valuation model shows that the intrinsic value for the stock is A$23.22, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. carsales.com’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from carsales.com?

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. carsales.com's earnings over the next few years are expected to increase by 63%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since CAR is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on CAR for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CAR. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that carsales.com has 3 warning signs and it would be unwise to ignore these.

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.

When trading carsales.com or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.