Auto Dealer Group (LSE:AUTO), the FTSE 100 on-line automotive market, noticed its share price enhance by 16% throughout Could. Most of this acquire occurred on 30 Could when its shares closed almost 15% greater as traders digested the corporate’s outcomes for the yr ended 31 March (FY24).

I believe it’s a inventory that’s typically neglected. Regardless of Auto Dealer being the fifty fifth most precious firm on the index, by way of the worth of offers positioned, it ranked 77th in the course of the first 4 months of 2024.

And I believe it’s honest to say that the corporate has proved a few of its doubters incorrect.

Not universally widespread

In the course of Could, Morgan Stanley thought its shares had been overvalued by roughly 25%. And it was fearful that Google’s entry into the UK market would signify a serious menace. Nevertheless, it did describe Auto Dealer as “arguably the best-in-class car vertical operator in Europe”.

Two months earlier, JP Morgan Cazenove mentioned: “We now see an increasingly challenging market backdrop coming to the fore – following six months of falling used car prices … and meaningful margin erosion for UK retailers — which we expect to temper consensus expectations on the core marketplace business.”

Monetary efficiency

Regardless of these downbeat assessments, the corporate’s FY24 outcomes confirmed a 14% enhance in income, a 26% enchancment in working revenue and a 13% rise in earnings per share, in comparison with FY23.

However one swallow doesn’t make a summer time.

Having mentioned that, the corporate does have a powerful observe document of development.

It first listed in 2015. Since then, except FY21 — when the pandemic prompted havoc — the corporate has grown its earnings per share yearly.

In addition to its historical past of rising each its income and income, there are different causes that may make me take into account investing.

Development prospects

I just like the sound of its ‘Deal Builder’ product, which is meant to allow consumers to worth their present automobile for part-exchange, apply for finance and reserve a alternative automobile. It’s at the moment being trialled. Nevertheless, 1,100 retailers have already signed-up.

Additionally, its web site stays vastly widespread with over 77m visits a month. It seems to be the go-to vacation spot for secondhand automobile consumers within the UK.

As well as, between now and 2029, Mordor Intelligence reckons the UK used automobile market will see a median annual development fee of 11.7%.

Dangers

However the enterprise does face its challenges.

Alphabet‘s Google Ads, which has already been launched in the US, Canada and Australia, will soon show UK vehicles for sale taken directly from the websites of dealers.

Personally, I’d somewhat use Auto Dealer’s web site than the Google platform. However the know-how big has been recognized to disrupt markets earlier than. I believe any enterprise, irrespective of how massive, could be nervous if Alphabet was a competitor.   

Additionally, its dividend is paltry. With a yield of 1.2%, it’s properly under the FTSE 100 common of three.8%.

However my greatest concern is that its shares are costly. They’re at the moment buying and selling on almost 28 occasions the corporate’s FY24 earnings. I’m unsure there’s a lot worth left in its share price.  

For comparability, Rightmove’s a number of is at the moment 21.

Given these dangers, I don’t wish to make investments in the meanwhile. I believe there are different alternatives elsewhere at the moment providing higher worth.