Auto Trader Reports 5% Revenue Growth and 8% Profit Increase in Full Year Results
Why we think this is neutral
Auto Trader's full year results show a mixed picture. On the positive side, the company reported a 5% increase in revenue to £601.1m and an 8% rise in operating profit to £376.8m. The basic earnings per share also grew by 12% to 31.66p. However, these positive results are tempered by several factors. The company faces a challenging market environment with economic uncertainties, high operating costs, and inflationary pressures affecting both Auto Trader and its customers. The slight decrease in Auto Trader's operating profit margin from 71% to 70% suggests some pressure on profitability. Additionally, the company's high valuation, with a price-to-sales ratio of about 13 and a P/E ratio of 28.4, may limit short-term upside potential. While the outlook for FY26 is cautiously optimistic, with expected retailer revenue growth between 5% and 7%, the company acknowledges ongoing challenges in the market. Given these mixed signals, a neutral sentiment seems appropriate, recognizing the company's solid performance but also the headwinds it faces.
Key Points
- Group revenue increased 5% to £601.1m
- Operating profit grew 8% to £376.8m
- Basic earnings per share up 12% to 31.66p
- Strong cash position with £15.3m and no debt
- Auto Trader operating profit margin slightly decreased from 71% to 70%
- Group operating profit margin increased from 61% to 63%
- Challenging market conditions with economic uncertainties and high costs
- Expected retailer revenue growth of 5-7% for FY26
- High valuation with P/S ratio of 13 and P/E ratio of 28.4
- Broker targets range from 624.00p to 946.00p
Summary
Auto Trader Group plc reported full year results with 5% revenue growth to £601.1m and an 8% increase in operating profit to £376.8m. Basic earnings per share grew by 12% to 31.66p. The company maintains a strong financial position with £15.3m in cash and no debt. However, Auto Trader faces challenges including economic uncertainties, high operating costs, and inflationary pressures. The outlook for FY26 is cautiously optimistic, with expected retailer revenue growth between 5% and 7%. The company's high valuation, with a price-to-sales ratio of about 13 and a P/E ratio of 28.4, may limit short-term upside potential. Broker targets range from 624.00p to 946.00p, with a mix of recommendations from Underweight to Buy.