Don't overlook NASDAQ:CARG—a stock with solid growth prospects and a reasonable valuation.

Last update: Jun 19, 2024

Our stock screener has singled out CARGURUS INC (NASDAQ:CARG) as an attractive growth opportunity. NASDAQ:CARG is demonstrating remarkable growth potential while maintaining strong financial indicators, making it a reasonably priced option. We'll explore this further.

How We Gauge Growth for NASDAQ:CARG

To evaluate a stock's growth potential, ChartMill utilizes a Growth Rating on a scale of 0 to 10. This comprehensive assessment considers various growth aspects, including historical and estimated EPS and revenue growth. NASDAQ:CARG has achieved a 7 out of 10:

CARG shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 28.71%, which is quite impressive.
The Earnings Per Share has been growing by 31.95% on average over the past years. This is a very strong growth
CARG shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 15.02% yearly.
The Earnings Per Share is expected to grow by 22.69% on average over the next years. This is a very strong growth
Based on estimates for the next years, CARG will show a quite strong growth in Revenue. The Revenue will grow by 14.42% on average per year.

Exploring NASDAQ:CARG's Valuation

ChartMill assigns a Valuation Rating to each stock, ranging from 0 to 10. This rating is calculated by analyzing different valuation elements, such as price to earnings and free cash flow, both in absolute terms and relative to the market and industry. In the case of NASDAQ:CARG, the assigned 5 reflects its valuation:

Compared to the rest of the industry, the Price/Earnings ratio of CARG indicates a somewhat cheap valuation: CARG is cheaper than 73.13% of the companies listed in the same industry.
The average S&P500 Price/Earnings ratio is at 28.73. CARG is valued slightly cheaper when compared to this.
70.15% of the companies in the same industry are more expensive than CARG, based on the Price/Forward Earnings ratio.
The average S&P500 Price/Forward Earnings ratio is at 20.21. CARG is valued slightly cheaper when compared to this.
Based on the Enterprise Value to EBITDA ratio, CARG is valued a bit cheaper than the industry average as 61.19% of the companies are valued more expensively.
The decent profitability rating of CARG may justify a higher PE ratio.
CARG's earnings are expected to grow with 17.54% in the coming years. This may justify a more expensive valuation.

What does the Health looks like for NASDAQ:CARG

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NASDAQ:CARG, the assigned 9 reflects its health status:

An Altman-Z score of 7.32 indicates that CARG is not in any danger for bankruptcy at the moment.
The Altman-Z score of CARG (7.32) is better than 86.57% of its industry peers.
CARG has no outstanding debt. Therefor its Debt/Equity and Debt/FCF ratios are 0 and belong to the best of the industry.
A Current Ratio of 2.78 indicates that CARG has no problem at all paying its short term obligations.
With a decent Current ratio value of 2.78, CARG is doing good in the industry, outperforming 61.19% of the companies in the same industry.
CARG has a Quick Ratio of 2.78. This indicates that CARG is financially healthy and has no problem in meeting its short term obligations.
With a decent Quick ratio value of 2.78, CARG is doing good in the industry, outperforming 61.19% of the companies in the same industry.

A Closer Look at Profitability for NASDAQ:CARG

ChartMill utilizes a Profitability Rating to assess stocks, scoring them on a scale of 0 to 10. This rating takes into account a variety of profitability ratios and margins, both in absolute terms and in comparison to industry peers. NASDAQ:CARG has earned a 6 out of 10:

Looking at the Return On Assets, with a value of 4.16%, CARG is in the better half of the industry, outperforming 73.13% of the companies in the same industry.
CARG has a Return On Equity of 6.38%. This is in the better half of the industry: CARG outperforms 73.13% of its industry peers.
Looking at the Return On Invested Capital, with a value of 4.69%, CARG is in the better half of the industry, outperforming 74.63% of the companies in the same industry.
The last Return On Invested Capital (4.69%) for CARG is well below the 3 year average (9.65%), which needs to be investigated, but indicates that CARG had better years and this may not be a problem.
CARG has a Profit Margin of 4.04%. This is in the better half of the industry: CARG outperforms 67.16% of its industry peers.
CARG has a Operating Margin of 4.99%. This is in the better half of the industry: CARG outperforms 67.16% of its industry peers.
CARG has a Gross Margin of 74.76%. This is in the better half of the industry: CARG outperforms 67.16% of its industry peers.

Every day, new Affordable Growth stocks can be found on ChartMill in our Affordable Growth screener.

Our latest full fundamental report of CARG contains the most current fundamental analsysis.

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.