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Auto Trader Has A Resilient Business Model At A Great Price

Jun. 04, 2020 3:46 PM ETAuto Trader Group plc (ATDRF)1 Comment
James Weston profile picture
James Weston


  • Auto Trader is the most popular UK automotive marketplace in terms of users.
  • The business has consistently created shareholder value through share buybacks and dividends.
  • Due to the COVID-19 panic in March 2020, the shares are trading way below past multiple averages.

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Editor's note: This article was amended on 8/4/20 to reflect minor corrections in the referenced data.

I am bullish on Auto Trader (OTC:ATDRF) due to its high quality capital light business model led by a management team with a track record of rewarding shareholders. There is potential for more earnings growth in the future given a high chance that more users will subscribe to the business offering. Further, the market has mispriced the shares which trade at less than half a past 6 quarter average Price to Book ratio and I don't see any downside in fundamentals.

Taken from S&P Capital IQ database.

Business model

Auto Trader is the UK's largest digital automotive marketplace, with more time spent on its platform than any other automotive site by its audience.

Users of the platform are defined into 3 categories:

  • Consumers: the general public who own cars, involved in transactions as both buyers and sellers.
  • Trade: car dealerships in the manufacturer distribution network, as well as used car dealerships.
  • Manufacturers: producers of cars (i.e. the car companies), they sell to fleet and lease companies and buyers in their franchise network.

Due to the diverse range of consumers, Auto Trader has acted as an intermediary for every party buying and selling cars by promoting them on its platform. Its cost per advertisement revenue model for consumers, and monthly subscription fees for the other car sellers and (recently) logistics companies, has allowed it to aggressively grow its top line since its IPO filing in March 2015. This has created substantial value for shareholders through

This article was written by

James Weston profile picture
Chemical Engineering Masters graduate with a strong interest in long/short equity investing. I have worked in 2 equity funds with top decile performance as an intern, a quality growth mutual fund in 2018 and then a long/short hedge fund in 2019. Currently working as a graduate Auditor at a Big 4.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (1)

Captain Value profile picture
Good call, although the price is not so great now as it was when you wrote this.
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