In the December 16 half, Carsales has reported a negative like-for-like profit for the first time. Whilst this was impacted by a write-down in the company’s investment in iCar Asia and a poorly performing finance division, all financial metrics point to a rapidly maturing business. Mundane, low double-digit growth in core online advertising revenues and mixed results in the company’s other divisions fail to justify the ‘halo’ earnings multiple this dominant high-profile and previously high-growth internet business has enjoyed. Judging by the lofty 20+ x PE multiple, investors appear to be reluctant to accept that the good times are over. However, we believe it is only a matter of time before the market recognizes that Carsales will not be able to live up to its historical reputation as a market darling. Contributed exclusively to Livewire by Cyan Investment Management: (VIEW LINK)


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James Marlay

Love the conviction Dean