Car sales . com
22/07/26
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ASX: CAR (CAR Group, formerly Carsales) has delivered solid 5-year revenue growth but has seen volatile net profits and fluctuating Returns on Equity (ROE) due to heavy international acquisitions. The company carries a substantial debt load but remains highly profitable with excellent cash conversion. [1, 2, 3, 4, 5]
Financial Highlights over the last 5 years
| Metric [1, 2, 3, 4, 5, 6, 7, 8, 10] | Recent Data (FY2025 / TTM) | 5-Year Trend & Context |
|---|---|---|
| Revenue | A$1.23 billion | Strong upward trend. Revenue has grown by roughly 20% to 30% over the last 3 years, driven by domestic dominance and US/LatAm expansions. |
| Net Profit | A$295 million | Volatile. Accounting profits fluctuated significantly (peaking in 2023 with non-operating gains before normalizing), but underlying operating profits continue to climb. |
| Debt | ~A$1.41 billion | The debt/equity ratio sits at roughly 0.51. Debt increased significantly over the 5-year period due to funding international acquisitions. |
| ROE (Return on Equity) | ~10.0% | Highly volatile over the last 5 years (peaked at 31.6% in 2023, dropped to 8.4% in 2024, and averaged ~16% mid-cycle). The recent dilution is normal during intensive international scaling phases. |
| Operating Margin | ~53% - 55% | Consistently exceptional. Their asset-light digital marketplace commands operating margins well above sector medians. |
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Tracked Market Performance
Over the last 5 years, the stock has experienced significant growth combined with recent valuation volatility. Trading near A$25.50, the company trades at a Price-to-Earnings (P/E) multiple of approximately 33 and offers a dividend yield of roughly 3.3%. [1, 2]
Over the last 10 years, the P/E ratio for CAR Group Limited (formerly Carsales, ASX: CAR) has averaged roughly 32x. Historically, its valuation has fluctuated between a low of about 13x (during the 2023 financial period) and a peak of over 53x (in 2024–2025). [1, 2, 3]
A breakdown of CAR's P/E multiple fluctuations reveals these key trends over the past decade:
- Long-Term Average: ~ 31.98 x
- Low Point: ~ 13.1x (Recorded in 2023, reflecting a period of compressed earnings or sharp share price drops).
- High Point: ~ 53.8x (Recorded over 2024 and 2025 as the company expanded globally and investor sentiment grew).
- Current Levels: Currently, the trailing P/E sits near 33x, and its Forward P/E is trading closer to 22x, indicating that analysts expect higher future earnings to normalize the premium multiple
Is it under threat from AI and Facebook marketplace?
Dividends are great up to now and rising every year. Only partly franked.
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ROIC Vs WACC
Over the last 10 years, CAR Group (ASX:CAR) has experienced a narrowing spread where its Return on Invested Capital (ROIC) has historically trended well above its cost of capital, but recently compressed to roughly match or sit slightly below its rising Weighted Average Cost of Capital (WACC). [1, 2]
Capital Returns and Cost Trends
- ROIC Trend: Historically achieved high double-digit returns on capital employed (such as over 80% a decade ago), but recent figures show ROIC has moderated to an estimated 7.81% to 8.80% due to an expanded capital base and large international acquisitions. [1, 2, 3, 4]
- WACC Trend: The 10-year median WACC for CAR Group sat around 8.92%, but broader market conditions and higher interest rates have pushed current WACC estimates up to 12.27%. [1, 2]
- Value Creation Spread: For most of the past decade, CAR’s ROIC comfortably exceeded its WACC, indicating strong economic value creation. Recently, the higher cost of capital means ROIC (~8%) tracks closer to or slightly below the elevated WACC (~12%), reflecting a transitional phase of capital efficiency as the digital classifieds giant digests global expansion. [1, 2, 3, 4, 5]
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Debt to Equity
CAR Group Limited (ASX:CAR) has a current debt-to-equity ratio of approximately 0.51 to 0.55. Over the past 10 years, CAR Group's debt-to-equity ratio has experienced a historical range from a low of 0.11 up to a high of 2.04, with a 10-year median value of 0.73. [1, 2]
10-Year Debt-to-Equity Summary
- Current Ratio: ~0.51 – 0.55
- 10-Year Median: 0.73
- 10-Year High: 2.04
Recent Yearly Estimates
- FY 2025 / Mid 2025: 0.46
- FY 2024: 0.46
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ARGO vs CAR buffett style sept 2026
An investment comparison between Argo Investments (ASX: ARG) and CAR Group (ASX: CAR) reveals a contrast between a conservative income-smoothing conglomerate vehicle and a high-moat digital capital compounder.
From a Buffett-style perspective—focusing on economic moats, pricing power, return on capital, and compounding efficiency—these two assets fit completely different categories in a portfolio.
Core Metric Comparison
The financial profiles of both companies differ significantly across growth, valuation, and distribution efficiency:
| Metric | Argo Investments (ASX: ARG) | CAR Group (ASX: CAR) |
|---|---|---|
| Business Model | Listed Investment Company (LIC) | Digital Marketplace / Auto Classifieds |
| 10-Year Total Return | ~9.0% p.a. (aligns with ASX 200) | ~14.5% p.a. (significantly beats index) |
| P/E Ratio (TTM) | 25.5x - 27.1x | 28.6x - 32.8x |
| Dividend Yield | 4.2% - 4.3% (100% Franked) | 3.0% - 3.7% (Partially Franked) |
| 10-Year Dividend Growth Rate | 2.5% - 2.7% p.a. | 12.9% p.a. |
| Payout Coverage | >100% of reported earnings | High earnings payout, but well covered by FCF |
Buffett-Style Analysis
1. Economic Moat & Pricing Power
- CAR Group: Possesses a textbook network effect moat. As the dominant automotive classifieds platform in Australia (Carsales) alongside growing international hubs, buyers go where the sellers are, and sellers go where the buyers are. This hands CAR immense pricing power; they can raise premium listing fees without losing volume, generating high gross margins that Buffett covets.
- Argo: Does not have a traditional business moat. It is a diversified, low-cost investment trust holding Australia’s top blue chips (e.g., BHP, CBA, Macquarie, CSL). Its competitive edge lies solely in its low internal management cost (~0.14%) and its multi-decade profit reserve used to smooth out dividend distributions during market downturns. [1, 2, 3]
2. Capital Allocation & Growth Dynamics
- CAR Group: A classic growth compounder. Over the last decade, CAR successfully expanded beyond Australia into high-growth international markets (such as Encar in South Korea and Trader Interactive in the US). It reinvests a substantial portion of cash into tech and global acquisitions, achieving a 12.9% 10-year dividend growth rate driven by genuine operational earnings scaling. [1, 2, 3]
- Argo: A passive income collector. Argo passes through the dividends it receives from its underlying portfolio. Its 10-year dividend growth rate sits at just 2.5% to 2.7% p.a., which barely keeps pace with historical inflation. It is designed for wealth preservation and steady income rather than aggressive capital compounding. [1, 2, 3]
3. Dividend Quality and Payout Sustainability
- CAR Group: While its P/E looks optically high and its dividend payout ratio is elevated relative to accounting net profit, its free cash flow significantly exceeds reported earnings ($0.498B FCF vs $0.314B NPAT). Because a digital marketplace requires very little physical inventory or capital expenditure, it converts almost all growth into liquid cash.
The Verdict
- Choose CAR Group if you are looking for a true "Buffett-style" business compounder. It features high barriers to entry, dominant market share, pricing flexibility, and a long runway for expanding global cash flows.
- Choose Argo if you are prioritizing immediate cash flow utility and risk mitigation. It behaves more like a low-volatility utility proxy, offering reliable, fully franked income at the expense of long-term outperformance
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More Buffett analysis
CAR Group Limited (ASX: CAR) demonstrates a dynamic structural shift in profitability, with its Return on Equity (ROE) stabilizing near 11.0% to 12.4% as of mid-2026. [1, 2]
To evaluate how CAR allocates capital, we look at its historical ROE trajectory alongside Warren Buffett's framework for high-moat, compounder businesses. [1]
1. Historical ROE Trend Analysis
CAR’s ROE has historically fluctuated due to major corporate restructuring, international equity raises, and aggressive global acquisitions.
| Metric | FY22 | FY23 | FY24 | FY25 | FY26 |
|---|---|---|---|---|---|
| Return on Equity (ROE) | 16.5% | 31.6% | 8.4% | 10.2% | 12.4% |
| Shareholders' Equity ($M) | 1,023 | 3,115 | 2,884.5 | 2,978 | 2,742.9 |
| Net Income ($M) | 161 | 648 | 250 | 275.5 | 313.7 |
- The FY23 Spike (31.6%): This massive outlier was driven by accounting step-ups and non-operating gains from consolidating overseas assets (such as fully acquiring Trader Interactive in the US and webmotors in Brazil).
2. Capital Allocation vs. Buffett Benchmarks
Benchmark 1: High and Consistent ROE
- Buffett Rule: Prefers consistent ROEs above 15% without excessive leverage.
Benchmark 2: Retained Earnings Test ("The $1 Rule")
- Buffett Rule: Every dollar of retained earnings must create at least one dollar of market value over time.
- CAR Group Performance: CAR distributes almost all its underlying earnings, maintaining a high dividend payout ratio of 96% to 101%. It opts to fund its massive international expansions via targeted debt and equity raises rather than relying purely on retained cash. This does not match Buffett’s preferred strategy of organic self-funding, though it has successfully built a global footprint. [1, 2]
Benchmark 3: Pricing Power & High Margins
- Buffett Rule: A true economic moat allows a business to maintain ultra-high margins.
- CAR Group Performance: This is where CAR shines. Its operating margin sits at a dominant 55.4% as of FY26. This immense pricing power highlights its marketplace moat; dealerships and private sellers must use CAR's platforms regardless of macroeconomic shifts. [1]
Benchmark 4: Debt and Balance Sheet Strength
- Buffett Rule: Avoid dangerous debt levels that compromise financial freedom.
- CAR Group Performance: CAR holds $1.61B in total debt against $2.74B in equity. Its debt-to-equity ratio sits around 58%, which safely satisfies typical domestic fundamental filters (under 70%). Furthermore, its high interest coverage ratio of 8.5x ensures its debt obligations are easily manageable. [1, 2, 3, 4]
The Investor Takeaway
CAR Group acts like a "Buffett-style" business when looking at its core marketplace moat, structural pricing power, and high operating margins. However, its aggressive international M&A strategy has temporarily lowered its pure capital efficiency metrics (ROE and ROIC) compared to historical norms. If the company winds down its acquisition phase and lets its global platforms scale organically, its ROE should continue to drift back toward historical highs
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