Car Group (ASX:CAR): Successful in Australia, but now going for global growth

For most of the listed life of Car Group (ASX:CAR), it has been known after carsales.com.au; its original car classifieds site in Australia. It was founded in 1997 and now has over 200,000 new and used cars for sale, but the company has even bigger ambitions. But the company, a recent addition to the ASX 50 and one that is worth over A$12bn, has bigger ambitions.

Car Group (ASX:CAR) is going global

In 1H25, the company generated 57% of its revenue outside Australia. And even in Australia, it has diversified away from cars towards boats, bikes, machinery, caravans and trucks. It generates 27% of revenue from North America, 18% from the LATAM region and 12% from Asia where it owns Trader Interactive, webmotors and Encar respectively.

Source: Company

We can understand investors at home in Australia not recognising any of these global brands. But many of these are the number one classified sites in their markets too. Encar has 6.9x market leadership of its next largest competitor whilst Webmotors and Trader Interactive have 3x.

Moreover, these sites provide other services too including pricing data, ownership information and even finance options. The prospect of using AI is being explored including prequalifying dealer leads, fraud lead blocking and even assisted customer support. The company is also looking to eventually offer payment services through its app and website, potentially eliminating the dealer from the equating altogether.

But the way this company makes its money right now is through ‘direct media’ – in other words, advertising. The average private add fee per vehicle is just over A$160 in Australia. With the average car price $35,000, it represents a take rate of 0.5%.

Car Group benefits from a ‘network effect’ where it gets more and more beneficial for its users as it attracts more and more of them. This is similar to Domain (ASX:DHG) and Rea Group (ASX:REA) which are real estate classified sites.

Good results, but will there be further growth?

At last years’ AGM, Car Group purported to generate 1006% Total Shareholder Return (i.e. dividends and share price appreciation) since September 2009, over 4x ahead of the 224% made by the ASX 200. The company made $1.1bn in revenue, $581m EBITDA and a $344m profit (up 41%, 37% and 24% respectively). It boasted 2.6m total vehicles online worldwide, 18bn page views, 49m unique viewers and 49k subscribed deals.

Results for the first half of FY25 appeared promising with 9% revenue growth and 5% profit growth. It has only guided to ‘good growth’ in its Proforma revenue, EBITDA and NPAT for the full year.

Analysts covering Car Group call for $1.17bn revenue and $641.6m EBITDA which would be 6% and 12% higher respectively. Then in FY26, $1.3bn revenue and $729.1m EBITDA, up 12% and 14% respectively. Their mean target price is $39.78, derived from 15 estimates ranging between $30 and $45 per share. However, these estimates place the company at 34x P/E and 2.9x PEG for FY25 and 30x P.E and 2.5x PEG for FY26. On that basis alone, you could say the company is overvalued.

The challenge

As the leader in its market, this company won’t be impacted by the competition in the immediate term (unless competition catches up, although companies like Car can just buy competitors when they begin to show potential to be a threat). Car Group purports to have a TAM of A$15.4bn, $8.4bn of which will be in North America. There are various splits between dealers, media and specific automobiles. But what will impact it is the car market more generally.

Remember during the pandemic when used car sales increased for the first time ever? Those were the days. These days, they are back in decline but are ahead of where they were pre-pandemic.

It is arguable that during tough economic times, consumers will turn to used cars rather than new ones. And in 2024, used car sales grew 12.1% to 2.3m. New car sales were 1.2m, up 1.7%, in that period in case you were wondering. In 2025, used car listings fell although listings rose.

This is an interesting paradox. If demand is weak, people won’t list in the first place. But it is possible the buyers market could cause people to ‘eyeball’ the site and thus generate revenue. And it also remains to be seen if the rise of EVs will cause people to pay a premium for them, especially as prices of EVs come down.

In our view, we would choose to watch rather than ignore this company. Even though its multiples are high, its entrenched monopoly on the market is compelling and means it should do well unless its market experiences a particularly sharp slowdown.

What are the Best ASX Stocks to invest in right now?

Check our buy/sell stock tips