CAR/Car Group

Car group, the big online car ad/trading place, reported a solid result yesterday.

The market liked it; in our view trading richly at 33x forward earnings (yield of ~2.2%). There are cheaper, still somewhat growth-y names out there, which are better value, in our mind.

The domestic Aussie franchise has been amazing, but it is pretty clear that it is harder and harder to deploy any incremental capital at the historical rate of return, hence the ROIC and ROE have essentially collapsed.

There’s little CAR can do about that, and investing is more than “did ROIC go up or down, is it high or low” and the earnings growth for CAR has been very strong for a long time.

But we do have this in the back of our mind for expensive secular growth narratives.

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