CRZ operate the website carsales.com.au.
It is the most popular website in Australia for people who buy and sell new and used cars
CRZ have adapted the same model to other areas with websites such as bikesales.com.au, boatsales.com.au, homesales.com.au, farmmachinerysales.com.au, equipmentsales.com.au; these websites have yet to establish the popularity of car sales but should provide opportunities for growth in their respective niches.
CRZ has 4 primary revenue streams; dealers pay to access CRZ's network (45%); private sellers pay to advertise their wares (17%); advertising across the network of sites (25%); and information services (13%). The number of users is the key driver for all of these revenue streams.
CRZ has grown earnings quickly since 2010.
EPS growth has averaged 24% pa over the past 4 years.
Cash flows have financed most of this growth with debt only recently climbing up to 25% of equity.
Recently CRZ has elected to spend some of their extra cash on similar sites buying 23% of iCarAsia (Malaysia/Indonesia), 30% of webmotors.br (Brazil) and 49.9% of encaresales (Korea).
International diversification gives CRZ the opportunity to leverage their experience and access bigger markets, creating opportunities for growth but adding risk.
Car Sales is not without its risks and investors have to understand they are paying for earnings that are yet to materialise.
If earnings were to stagnate at current levels a halving of the share price is feasible.
Supernormal growth is very achievable when you take into account the track record of CRZ. Its competitive positioning of its various sites, and the precedent set by similar sites such as realestate.com.au.
CRZ justifies its price premium for risk tolerant investors looking for growth who are willing to hold the stock long-term.
For more information about Car Sales - CRZ please contact us on 07 4771 4577.