Carsales.com Limited (ASX:CRZ) is an Australian business offering online access to automotive classifieds.

The company listed on the ASX at $3.92 in September 2009, up 12% from the $3.50 price at which the shares were issued.

Shortly after listing, CRZ was added to the S&P/ASX 200.

It is the largest consumer website in the country which covers automotive, plant machinery, motorcycle, caravan, marine and display advertising.

CRZ operates 23 individual websites which are all specifically focused on different products.

The company has been a fantastic growth story, benefitting from a migration to online advertising.

It has been one of the hot stocks since bottoming out at $3.79 earlier this month, having surged around 30% in the past few weeks.

Tough conditions, not for Carsales

Whilst most consumer sectors struggle in the face of tough economic conditions, CRZ has continued to prosper.

This is mainly because CRZ has been at the forefront of the continuing migration of advertisers from print to online.

Being proactive in identifying market trends has helped CRZ continue to be a clear leader in market share.

Surprisingly, there has been robust growth in new vehicle enquiry volumes despite decreased new vehicle stock availability.

CRZ recently acquired Jumbuck Entertainment's OZtion assets which is one of the world's leading developers of mobile phone applications.

FY earnings

CRZ reported a 30% jump in FY underlying earnings to $83.8 million with EBITDA margins at 55%.

Operating cashflow for the period climbed 19% to $60.1 million with operating revenue rising 26% to $152.5 million.

Earnings per share (EPS) increased by 34% to 25 cps while a final FY11 dividend of 10.5 cents per share was declared.

The majority of its revenue (47%) comes from the Dealer division and the Private division which accounts for approximately 20% of revenue.

The period saw continued strong growth in automotive enquiry volumes, up 15% on year.

Looking ahead

CRZ's FY earnings were highly impressive, convincingly beating guidance. The company is looking to stay ahead of its competitors through the use of mobile devices.

Mobile now accounts for 13% of CRZ's automotive traffic.

The acquisition of OZtion delivers CRZ a robust and proven e-commerce platform that will complement its growing general classifieds business.

CRZ has introduced significant new product releases with many planned for the coming months.

Its mobile application is expected to continue growing at a strong rate and will be a key area of ongoing focus.

Tough economic conditions remain a key challenge but we feel CRZ has enough upside potential to remain an outperformer, thus making it one of the stocks to watch.