3 reasons why the Bapcor (ASX:BAP) share price could be a buy

There are a few compelling reasons why the Bapcor Ltd (ASX:BAP) share price could be a good long-term buy right now.
The post 3 reasons why the Bapcor (ASX:BAP) share price could be a buy appeared first on The Motley Fool Australia. –

There are a few reasons why the Bapcor Ltd (ASX: BAP) share price could be an interesting idea to some investors at the moment.

What is Bapcor?

Bapcor is a leading auto parts business across Australia and New Zealand.

It has a number of different businesses that service various parts of the auto market. The biggest division is Burson Auto Parts, which supplies parts to mechanic customers. Sometimes the parts can be supplied within two hours. Burson has over 190 stores with more than 800 delivery vehicles.

Other businesses in the trade segment include Precision Automotive Equipment and BNT.

Next is a whole range of specialist wholesale businesses that supplies the auto market with a large range of products. Bapcor says that many of these businesses are leaders in their product categories. There’s a long list of names including: AAD, Bearing Wholesalers, Baxters, MTQ, Roadsafe, JAS Oceania, HCB, Diesel Distributors, Federal Batteries, Premier Auto Trade and AADi.

Bapcor has also made acquisitions relating to truck parts, so it’s also in the light and heavy commercial track space. This division could be helpful for the Bapcor share price and profit over the coming years.

In the retail space, Bapcor owns the large Autobarn business. It also has service businesses including Midas, ABS, Shock Shop and Battery Town.

Why could the Bapcor share price be attractive?

1: Strong results

A key part of delivering strong returns for shareholders is delivering good financial results. As Benjamin Graham once said, the share market is like a weighing machine.

Bapcor has been delivering growth for many years and the FY21 half-year result was no exception.

Revenue grew by 25.8% to $883.6 million. Pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 36.5% to $145.6 million.

Bapcor revealed that the trade segment, including Burson, grew revenue by 12.3% with same store sales growth of 11%. It added another nine stores to reach 195 stores nationwide.

The specialist wholesale division saw organic revenue growth of 17% and organic EBITDA growth of 36.2%. Including Truckline and Diesel Drive, specialist wholesale revenue rose 39.5% and EBITDA grew 54.9%.

Bapcor’s retail and service division also saw a lot of growth, with revenue rising 44% and EBITDA going up 55.8%. Autobarn same store sales went up 37.1%. Bapcor has been giving trading updates over the last nine months, showing strong retail growth and this has boosted the Bapcor share price. 

Pro forma earnings before interest and tax (EBIT) went up 45% to $106.8 million and pro forma net profit after tax (NPAT) grew 54% to $70.2 million. Pro forma earnings per share (EPS) grew 28.9% to 20.7 cents.  

2: Growth into Asia

The populations of Australia and New Zealand are small compared to Asian countries.

Bapcor is only just getting started in Asia. At the moment it has six Burson outlets in Thailand. It has a target of more than 80 stores for Thailand, with a turnover target of $100 million. At the moment its turnover is $4 million.

Bapcor talks about “South East Asia”, not just Thailand, when it comes to growth in the region. There could be other countries to expand into down the line. 

It will take time for Bapcor to grow its network and profit margins there, but over time it could become a much bigger division.

Having a strong online offering could also really help things in both Asia and domestically. Bapcor is currently working on a new distribution warehouse in Victoria.

3: Bapcor share price valuation

The Bapcor share price has fallen by 14% since 8 February 2021, which is a reasonably large drop over just one month.

Considering all of the different growth plans that the company has, a lower price could make it more attractive to investors.

At the current Bapcor share price, it’s valued at 20x FY21’s estimated earnings. It also has a current grossed-up dividend yield of 3.7%.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 reasons why the Bapcor (ASX:BAP) share price could be a buy appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!