What Is carsales.com Ltd's (ASX:CAR) Share Price Doing?

While carsales.com Ltd (ASX:CAR) might not be the most widely known stock at the moment, it maintained its current share price over the past couple of month on the ASX, with a relatively tight range of AU$22.98 to AU$24.67. However, does this price actually reflect the true 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?

According to my valuation model, the stock is currently overvalued by about 22%, trading at AU$24.40 compared to my intrinsic value of A$19.99. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like carsales.com’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of carsales.com, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? If you believe CAR is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, 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 best time to enter into the stock. you may want to reconsider buying the stock at this time. The company’s price has climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

If you want to dive deeper into carsales.com, you'd also look into what risks it is currently facing. To that end, you should learn about the 5 warning signs we've spotted with carsales.com (including 2 which are potentially serious).

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.

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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.