When a FTSE 100 stock can’t stop falling in value, I’ll always sit up and pay attention. And I’ll be particularly quick to do so if it happens to be one of the best growth stocks in the entire index. All in my Foolish opinion, of course.

Stuttering performance

Automotive marketplace giant Auto Trader (LSE: AUTO) has slumped over 20% in the last month alone. That’s a pretty terrible drop for a multi-billion pound business.

There seems to be a few things worrying the market. For one, analysts appear underwhelmed by the firm’s recent set of numbers.

Yes, group revenue and operating profit were up 5% and 6% respectively in the six months to the end of September. But a lack of upgrade to full-year guidance looks to have spooked some.

There is also concern over car dealers cancelling or downgrading their Auto Trader packages in protest at the site’s Deal Builder feature. This allows buyers to do the majority of the buying process online and includes taking a vehicle off-sale for a small fee.

Some dealers are concerned that this feature allows uncommitted buyers to tie up inventory and reduce customer leads. A danger is that this dissatisfaction could spread.

Quality FTSE 100 stock

Notwithstanding the recent wobble, Auto Trader still boasts many hallmarks of a quality business.

I often think of it as the Rightmove of its space. By this, I mean that it has a virtual monopoly in what it does. For example, over 75% of all minutes spent on automotive marketplaces were spent on its site in the aforementioned six-month period, at least according to Auto Trader.

Like the property portal mentioned, the firm’s online-only presence also means operating margins are among the highest you’ll see from a listed business.

But is it too expensive?

All that said, one long-running issue I’ve had with the shares is that they’re usually very expensive, at least compared to the FTSE 100 average. We’re talking about a price-to-earning (P/E) ratio in the high 20s.

Again, this goes some way to explaining why they’ve been hammered. Investors tend to get worried if highly-priced growth stocks might be underperforming.

The forecast P/E now stands at 17. That’s clearly a lot lower than where it once was. It might even prove a bargain in time if the company’s increasing use of AI opportunities, such as its Co-Driver product (which helps to make better adverts), serve to boost performance.

Nevertheless, it could be said that this reflects current conditions in the market. When times are tough, purchasing a new vehicle can usually be postponed.

According to my data provider, there’s been no director buying in the open market for a long time either. Ideally, I want those best-positioned to know how the £5bn-cap’s performing to be investing their own money into the business.

On the watchlist for now

On a more positive note, Auto Trader doesn’t seem to be subject to any attention from short sellers. That doesn’t mean the shares can’t fall further, of course. But it does mean that traders aren’t betting there’s more misery to come. Or, at least, enough misery to make a killing on.

With the outlook seeming foggy however, I’m content to add the stock to my fast-growing watchlist for now.