carsalescom Ltd (ASX:CAR), a internet software and services company based in Australia, saw a double-digit share price rise of over 10% in the past couple of months on the ASX. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on carsales.com’s outlook and valuation to see if the opportunity still exists. View our latest analysis for carsales.com
Is carsales.com still cheap?
The stock is currently trading at A$14.49 on the share market, which means it is overvalued by 33% compared to my intrinsic value of A$10.86. 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. 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. With profit expected to grow by 49.73% over the next couple of years, the future seems bright for carsales.com. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in carsales.com’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe carsales.com should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 tabs on carsales.com for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for carsales.com, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.