Auto Trader Group: A Potential Growth Stock Buy with Soaring Profit and Dominance

Are you on the lookout for a potential growth stock to add to your portfolio? Look no further than Auto Trader Group (LSE: AUTO). After their recent fiscal year results exceeded market expectations, the share price soared 13% in a single day, outperforming the FTSE 100. With a 35% increase in share price over the past five years, Auto Trader is definitely a stock worth considering.

The company, which operates the UK’s largest automotive marketplace, reported impressive financial results for the year ending in March 2024. Revenue increased by 14%, operating profit by 26%, and adjusted earnings per share by 8%. Additionally, operating cash flow rose by 16%, showcasing the company’s financial strength.

While Auto Trader’s dividend yield may be modest at 1.3%, the firm has a progressive dividend policy, with dividends increasing by 14% in the past year. Furthermore, the company returned £250m to shareholders through buybacks, indicating a commitment to rewarding investors.

One of the key factors to consider when evaluating a growth stock like Auto Trader is its potential for future dividends. A strong dividend policy can turn growth stocks into cash cows in the long run, providing steady cash rewards to shareholders.

Despite its premium valuation, with a price-to-earnings ratio of 26 for the upcoming year, Auto Trader’s market dominance sets it apart from its competitors. With over 80% of car buyers using Auto Trader during their purchasing journey, the company’s position in the market is unrivaled.

In conclusion, while the high valuation may pose some risks for growth investors, Auto Trader’s strong financial performance and market dominance make it a compelling investment opportunity. Considering the potential for future earnings growth and dividends, Auto Trader is definitely a stock worth keeping an eye on. Don’t miss out on this exciting growth stock – it could be a valuable addition to your investment portfolio.