While growth is established for NASDAQ:CARG, the stock's valuation remains reasonable.

Last update: Aug 6, 2024

Consider CARGURUS INC (NASDAQ:CARG) as an affordable growth stock, identified by our stock screening tool. NASDAQ:CARG is showcasing impressive growth figures and is well-positioned in terms of profitability, solvency, and liquidity. Moreover, it seems to be priced reasonably. Let's dive deeper into the analysis.

Evaluating Growth: 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
Measured over the past years, CARG shows a quite strong growth in Revenue. The Revenue has been growing by 15.02% on average per year.
The Earnings Per Share is expected to grow by 31.44% 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 15.19% on average per year.

Assessing Valuation for NASDAQ:CARG

An integral part of ChartMill's stock analysis is the Valuation Rating, which spans from 0 to 10. This rating evaluates diverse valuation factors, including price to earnings and cash flows, while considering the stock's profitability and growth. NASDAQ:CARG has received a 5 out of 10:

CARG's Price/Earnings ratio is a bit cheaper when compared to the industry. CARG is cheaper than 72.46% of the companies in the same industry.
CARG's Price/Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 28.44.
Compared to the rest of the industry, the Price/Forward Earnings ratio of CARG indicates a somewhat cheap valuation: CARG is cheaper than 72.46% of the companies listed in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 19.90, CARG is valued a bit cheaper.
63.77% of the companies in the same industry are more expensive than CARG, based on the Enterprise Value to EBITDA ratio.
CARG has a very decent profitability rating, which may justify a higher PE ratio.
CARG's earnings are expected to grow with 15.97% in the coming years. This may justify a more expensive valuation.

Health Insights: NASDAQ:CARG

ChartMill assigns a proprietary Health Rating to each stock. The score is computed by evaluating various liquidity and solvency ratios and ranges from 0 to 10. NASDAQ:CARG was assigned a score of 9 for health:

CARG has an Altman-Z score of 6.91. This indicates that CARG is financially healthy and has little risk of bankruptcy at the moment.
CARG has a better Altman-Z score (6.91) than 81.16% 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.
CARG has a Current Ratio of 2.78. This indicates that CARG is financially healthy and has no problem in meeting its short term obligations.
The Current ratio of CARG (2.78) is better than 60.87% of its industry peers.
A Quick Ratio of 2.78 indicates that CARG has no problem at all paying its short term obligations.
CARG has a Quick ratio of 2.78. This is in the better half of the industry: CARG outperforms 60.87% of its industry peers.

How do we evaluate the Profitability for NASDAQ:CARG?

ChartMill employs its own Profitability Rating system for stock evaluation. This score, ranging from 0 to 10, is derived from an analysis of diverse profitability metrics and margins. In the case of NASDAQ:CARG, the assigned 6 is noteworthy for profitability:

Looking at the Return On Assets, with a value of 4.16%, CARG is in the better half of the industry, outperforming 72.46% of the companies in the same industry.
CARG's Return On Equity of 6.38% is fine compared to the rest of the industry. CARG outperforms 73.91% 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 75.36% of the companies in the same industry.
The 3 year average ROIC (9.65%) for CARG is well above the current ROIC(4.69%). The reason for the recent decline needs to be investigated.
Looking at the Profit Margin, with a value of 4.04%, CARG is in the better half of the industry, outperforming 68.12% of the companies in the same industry.
CARG has a better Operating Margin (4.99%) than 68.12% of its industry peers.
CARG's Gross Margin of 74.76% is fine compared to the rest of the industry. CARG outperforms 68.12% of its industry peers.

More Affordable Growth stocks can be found in our Affordable Growth screener.

Check the latest full fundamental report of CARG for a complete fundamental analysis.

Keep in mind

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.