Up 35% in 12 months, this surging FTSE 100 stock’s near an all-time high!

This FTSE 100 stock recently rocketed to a record high after the tech company behind it released a fantastic set of full-year results.

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Shares of car marketplace Auto Trader (LSE: AUTO) reached an all-time high of nearly 850p on 30 May. This means the FTSE 100 stock has now more than doubled from a pandemic low of 372p in April 2020.

The share price was driven higher by very strong annual results for the year ended 31 March (FY24). The firm also predicted “another good year” to come, which was music to investors’ ears.

After its rise though, is this Footsie share still worth me buying? Let’s open the bonnet and take a look.

Excellent results

Full-year group revenue increased 14% year on year to £571m, with double-digit growth across all segments. Average revenue per retailer (ARPR) grew 12%, boosted by continued uptake of additional products and services.

Encouragingly, revenue at Autorama, the company it acquired in 2022, rocketed 51% to £41.2m. Vanarama, its public-facing brand, is a leading aggregator of vehicle leasing deals online.

Operating profit increased 26% to £348.7m. That translated into a very healthy 61% operating profit margin, up from 55% the year before. Core Auto Trader operating margin expanded to 71% from 70%.

Meanwhile, pre-tax profits increased 18% to £345.2m.

Looking ahead, management said a “robust” used car market should continue into the current financial year (FY25).

Attractive technology platform

All this highlights how profitable the firm’s asset-light marketplace model is. By avoiding the expense of owning any physical dealerships or car inventory, Auto Trader has a much lower cost structure.

As a result, it should be in a position to continue returning lots of cash to shareholders. During the year, it bought back £170m of its own shares and spent just over £80m on dividends.

The 1.1% yield is meagre, but the dividend was lifted 14%. Clearly, the company is in very good nick.

Major competition incoming?

Over 75% of all minutes spent on vehicle classified sites were on its marketplace during the year. And two in three UK car buyers only use Auto Trader. It’s 10 times larger than its nearest competitor.

So this remains a truly dominant and well-trusted company in its industry.

However, news that Alphabet‘s Google is going to be a direct competitor shouldn’t be taken lightly. The tech giant’s reportedly launching a new vehicle ads format. The aim is to make it easier for businesses to promote their relevant inventory and reach new audiences.

Obviously, this has the potential to challenge Auto Trader’s market-leading position over time.

Any whiff of this by investors and the stock could sell off aggressively, especially as it’s currently trading at close to 30 times earnings. This high valuation tells us strong future growth is expected.

On the flip side, consumer behaviour can be difficult to change. Personally, I still use the Skyscanner app to search for flights rather than Google’s rival service. I prefer the familiarity of the layout.

Would I buy the stock today?

In mid-May, I offloaded my Auto Trader shares for a 36% profit. While the timing cost me further post-earnings gains, I sold because I thought other stocks offered better value.

Nevertheless, I would consider investing again at the right price (unless Google became a real competitive threat). But as things stand, I still see more attractive opportunities elsewhere.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Ben McPoland has positions in Alphabet. The Motley Fool UK has recommended Alphabet and Auto Trader Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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