Carsales.com Ltd (ASX: CAR) is taking its highly profitable business model to global markets, and making a splash.As I covered in a recent Selfwealth Live show, see above, Carsales.com Ltd (ASX: CAR) has been spitting out hugely impressive growth.

Carsales already dominates second-hand/private car listings and car dealership sales in Australia, however, it also has operations overseas (in South Korea, South America, and now North America).

Source: Selfwealth financials tab, September 2022

As the chart above shows, Carsales' revenue (green line) has compounded rapidly while its profit (purple line) has risen along with it.

In turn, this profitable growth has translated to a higher Carsales share price -- it's up 216% in 10 years -- and a heap of dividends.

All up, since 2011, an additional $4.50 of dividends have been paid to shareholders ($6.42 including franking credits). This translates to an additional return of 92% against its $6.99 share price in 2011.

Impressive.

Carsales going global

Looking at Australia's blue chip companies can sometimes feel like a graveyard of failed overseas expansion. National Australia Bank (ASX: NAB), ANZ Banking Group (ASX: ANZ)... the list goes on.However, some companies, like Afterpay (now part of Block), BHP Group (ASX: BHP), Macquarie Group (ASX: MQG), and to a lesser extent Seek Ltd (ASX: SEK) and REA Group (ASX: REA), have been able to pull off their global ambition.

Carsales.com is aware of the challenges and has approached its global expansion with caution. That said, I think the way Carsales has done it is impressive, to say the least.

Knowing what they know about automotive listings, including how competitive markets like the US can be, Carsales chose to buy part of an RV, commercial trucks and powersports brand in the USA called Trader Interactive.

Initially, Carsales bought slightly less than half of the company for $US624 million. Then, earlier in 2022 it announced it would pay an additional $US809 million for a full takeover.

Make no mistake, this is a massive acquisition for Carsales.

Trader Interactive (TI) connects 13 million consumers each month to 9,500 dealers. Importantly, I've taken three things away from this deal:

1. Carsales didn't rush into it. Carsales' management chose to acquire a big stake in TI and in doing so got to know the business and industry -- making it a more informed buyer of the entire business.

2. TI is a relatively small way to get a dominant share of an important and growing US automotive marketplace -- Carsales would have been crazy to go headfirst into full-blown competition in private car sales.

3. Finally, Carsales has already identified meaningful ways to increase the "yield" (AKA increase prices and advertising revenue) from TI, meaning it can grow TI without having to invest significant sums of money.

Buy, Hold or Sell?

With Carsales.com having a proven pedigree for automotive sales and a strong management team, it's easy to want to back to the company. However, while the company has experienced success in places like South Korea, the US expansion is both a massive opportunity and risk.

Analyst research inside Selfwealth suggests shares are currently trading around fair value. While I take this with a pinch of salt (blue chips almost always trade around "analyst fair value"), I think it illustrates my point that investors are waiting to get updates on how the US is tracking before piling in. As well as how the local business is trading in an uncertain economic climate.

I think Carsales is the type of company I would love to build a small position in when investor sentiment is very low. At the moment, everything is going right for Carsales -- so I'll be watching from the sidelines.

Cheers!

Owen

Owen Raszkiewicz is the Founder of Rask, and host of Selfwealth Live. You can follow him on Twitter.