An increase in the dividend underlined the company’s positive results.
Auto Trader (AUTO) outpaces a tough car market
- Revenue and profits grow for the UK’s largest digital automotive marketplace.
- Brexit not expected to impact on the company’s operations.
- A modest dividend of around 1% and relatively expensive looking shares means we suggest no more than a hold rating.
Auto Trader beat expectations with its full year results today and said the new financial year had started well. The company reported an 8% increase in revenue to £355m and a 15% increase in pre-tax profit to £242.4m. Moreover, revenue per retailer increased by 9%; a trend that is expected to continue. Brexit is not expected to affect the company’s operations but it does foresee a low to mid-single digit increase in its costs in 2019. However, the company’s confidence was underlined by a 14% rise in the dividend.
The company has certainly benefitted from the trend for people to trade in their cars for another second-hand model on a fairly regular basis, and the new joint venture with Cox to provide an online B2B auction service should provide more growth.
Our View on Auto Trader - Hold
The solid figures were well received by the market with the shares initially rising before falling back slightly. That may be due to some profit taking as the stock has had a very good run since March, with the outlook for the company still looking positive. However, with the shares trading on 26 times prospective earnings and a fairly modest dividend yield of around 1% the shares look to be fairly valued and we would suggest no more than a hold rating.
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