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Cars.com, Inc. (CARS)
NYSE:CARS
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Cars
(NYSE:CARS)73Outperform
Positive Factors
Acquisition Strategy
The recent acquisition of DealerClub adds a reputation-based dealer-to-dealer wholesale auction marketplace that strategically augments Cars.com’s platform capabilities.
Strategic Transformation
Cars.com has successfully transformed from a listings business to a technology-driven platform digital solutions provider that helps drive vehicle sales and improve retail dealer.
Negative Factors
Financial Performance
CARS delivered 4Q24 revenue of $180.4MM, missing the Street's $183.8MM as well as the low of guidance which was ~$181.5MM.
Cars (CARS) vs. S&P 500 (SPY)
Market Cap
$743.82M
Dividend YieldN/A
Average Volume (3M)729.52K
Price to Earnings (P/E)17.2
Beta (1Y)1.70
Revenue Growth4.35%
EPS Growth-58.76%
CountryUS
Employees1,700
SectorConsumer Cyclical
Sector Strength53
IndustryVehicles
Share Statistics
EPS (TTM)0.71
Shares Outstanding63,847,460
10 Day Avg. Volume1,333,573
30 Day Avg. Volume729,519
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.03
Price to Cash Flow (P/CF)6.20
P/FCF Ratio4.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$19.75Price Target Upside60.70% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
Cars Business Overview & Revenue Model
Company DescriptionCars (CARS) is a leading digital automotive platform that connects car buyers with sellers, offering a comprehensive suite of products and services for the automotive industry. The company operates primarily in the online automotive marketplace sector, providing car buyers with detailed vehicle listings, reviews, and research tools, while enabling dealers and manufacturers to effectively market their inventory to a broad audience.
How the Company Makes MoneyCars makes money primarily through its online advertising model, where automotive dealers and manufacturers pay for listing their vehicles on the platform. The company's revenue streams include dealer subscription fees for premium listings, display advertising, and lead generation services that connect potential buyers with dealers. Additionally, Cars generates income from its data analytics services, which offer insights into consumer behavior and market trends, helping car dealers optimize their sales strategies. Strategic partnerships with automotive manufacturers and financial institutions also contribute to the company's earnings by expanding its reach and enhancing its service offerings.
Cars Financial Statement Overview
Summary
Cars demonstrates an impressive financial position supported by a strong balance sheet and robust cash flow generation. While revenue growth and operating efficiency are evident, the decline in net profit margin highlights potential cost pressures or competitive challenges. The elimination of debt and solid cash flow metrics position the company well for future growth and stability in the dynamic vehicles industry.Income Statement
The company has demonstrated strong revenue growth with a 4.35% increase from the previous year and consistent gross profit margins of over 80%. However, net profit margin has declined significantly from 17.19% to 6.70%, indicating increased costs or reduced pricing power. EBITDA and EBIT margins remain stable, reflecting operational efficiency.78
Positive
Balance Sheet
The balance sheet is robust with a significant improvement in debt position, moving to zero total debt, enhancing financial stability. The equity ratio is strong at 45.99%, and ROE is healthy at 9.42%, indicating good returns for shareholders. The improvement in stockholders' equity over time reflects strong financial health.85
Very Positive
Cash Flow
Cash flow from operations has increased by 11.56%, indicating strong cash generation. Free cash flow has grown by 29.03%, enhancing liquidity. The company exhibits a high operating cash flow to net income ratio, suggesting effective conversion of income into cash. Stability in cash flow is a positive indicator for financial resilience.90
Very Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 718.33M | 719.15M | 689.18M | 653.88M | 623.68M | 547.50M | Gross Profit |
| 484.20M | 594.82M | 566.98M | 538.92M | 509.48M | 445.97M | EBIT |
| 48.65M | 53.50M | 54.12M | 66.04M | 48.34M | 7.33M | EBITDA |
| 174.19M | 136.85M | 151.53M | 161.43M | 151.57M | -796.38M | Net Income Common Stockholders |
| 39.23M | 48.19M | 118.44M | 17.21M | 7.72M | -817.12M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 39.20M | 50.67M | 39.20M | 31.71M | 39.07M | 67.72M | Total Assets |
| 1.17B | 1.11B | 1.17B | 1.02B | 1.01B | 1.08B | Total Debt |
| 483.25M | 0.00 | 483.25M | 472.38M | 466.32M | 583.90M | Net Debt |
| 444.05M | -50.67M | 444.05M | 440.67M | 427.25M | 516.18M | Total Liabilities |
| 680.34M | 600.38M | 680.34M | 640.44M | 640.27M | 735.54M | Stockholders Equity |
| 492.11M | 511.49M | 492.11M | 384.43M | 366.93M | 340.18M |
| Cash Flow | Free Cash Flow | ||||
| 160.30M | 149.52M | 115.84M | 108.80M | 118.81M | 121.90M | Operating Cash Flow |
| 167.66M | 152.52M | 136.72M | 128.51M | 138.00M | 138.62M | Investing Cash Flow |
| -100.51M | -24.60M | -97.05M | -84.38M | -39.45M | -16.71M | Financing Cash Flow |
| -64.30M | -115.96M | -31.75M | -51.49M | -127.20M | -67.73M |
Cars Technical Analysis
Negative
12.29
Price Trends
16.61
Negative
17.19
Negative
17.81
Negative
Market Momentum
-1.49
Positive
29.37
Positive
7.73
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CARS, the sentiment is Negative. The current price of 12.29 is below the 20-day moving average (MA) of 15.22, below the 50-day MA of 16.61, and below the 200-day MA of 17.81, indicating a bearish trend. The MACD of -1.49 indicates Positive momentum. The RSI at 29.37 is Positive, neither overbought nor oversold. The STOCH value of 7.73 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CARS.
Cars Risk Analysis
Cars disclosed 36 risk factors in its most recent earnings report. Cars reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Cars Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $11.03B | 12.03 | 18.50% | 2.69% | 3.14% | -11.22% | |
73 Outperform | $743.82M | 17.19 | 9.60% | ― | 4.35% | -58.76% | |
72 Outperform | $5.12B | 11.95 | 12.76% | ― | 16.11% | -24.72% | |
70 Outperform | $46.03B | 118.84 | 27.94% | ― | 26.94% | -57.49% | |
66 Neutral | $2.30B | 45.60 | 4.80% | ― | 6.47% | ― | |
60 Neutral | $13.01B | 10.45 | 0.79% | 3.53% | 1.60% | -22.47% | |
48 Neutral | $188.47M | ― | -22.31% | ― | 10.64% | 38.48% |
* Consumer Cyclical Sector Average
Performance Comparison
CARS
Cars
12.29
-6.46
-34.45%
ABG
Asbury
254.84
45.14
21.53%
KAR
Kar Auction Services
21.32
5.29
33.00%
PAG
Penske Automotive Group
169.20
21.10
14.25%
TRUE
TrueCar
2.11
-1.56
-42.51%
CVNA
Carvana Co
188.47
103.17
120.95%
Cars Earnings Call Summary
Earnings Call Date: Feb 27, 2025 | % Change Since: -19.67% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance in 2024, including record revenue and strategic expansions through new products and acquisitions, while addressing challenges such as dealer revenue decline and initial margin pressure. The company showed confidence in overcoming these challenges through strategic initiatives and new leadership.Highlights
Record Full-Year Revenue
Cars.com Inc. delivered record full-year revenue of $719 million, up 4% year over year, marking seventeen consecutive quarters of year-over-year revenue growth.
OEM and National Revenue Growth
OEM and national revenue increased by 15% year over year in Q4, contributing to a full-year growth of 18%, with half of the OEM partners increasing their spending.
AccuTrade Expansion
AccuTrade reached over 1,000 dealerships with a 35% increase in annual appraisal volume and a 23% increase in vehicles acquired post-appraisal per dealer year over year in Q4.
New Product Innovations and Acquisitions
Introduction of the DealerQuote acquisition and the launch of Dealer Club, a dealer-to-dealer wholesale marketplace, expanding into a $10 billion wholesale market.
Strong Free Cash Flow
Free cash flow reached $128 million, the highest level since 2018, reflecting strong operating discipline.
Appointment of New Chief Commercial Officer
Lisa Goss was appointed as the new Chief Commercial Officer to drive revenue growth and go-to-market strategies.
Share Repurchase Program
Announcement of a new $250 million share repurchase authorization over three years, refreshing and increasing the prior $200 million authorization.
Lowlights
Dealer Revenue Decline
Dealer revenue was robust but slightly down year over year in the fourth quarter due to seasonal softness, elevated churn, and fewer upgrades.
ARPD Decline
Q4 ARPD was down $48 year over year, affected by a lower customer count and less upgrade activity.
Initial Margin Pressure
First-quarter 2025 adjusted EBITDA margin is expected to be down slightly year over year due to lower dealer revenue exit rates and investments in Dealer Club.
Seasonal Softness Impact
Marketplace performance was affected by expected seasonal softness, leading to slightly elevated churn and fewer upgrades in Q4.
Company Guidance
In the fourth quarter 2024 earnings call, Cars.com Inc. announced strong financial performance with a record revenue of $719 million for the year, marking a 4% increase year over year. The company achieved a free cash flow of $128 million and an adjusted EBITDA margin improvement of nearly one percentage point. For the fourth quarter alone, revenue reached a new high of $180.4 million, driven by a 15% year-over-year growth in OEM and national revenue, resulting in a full-year OEM growth of 18%. Despite some seasonal softness affecting dealer revenue, Cars.com maintained robust consumer engagement, with over 23 million shoppers and 143 million visits in Q4. As they look forward to 2025, the company anticipates revenue growth of $745 million, supported by product innovation, new launches, and strategic acquisitions like Dealer Club, with expectations for sustained growth acceleration in the second half of the year.Cars Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Cars Commerce Announces Leadership Transition for 2025
Neutral
Feb 27, 2025
Doug Miller, President and Chief Commercial Officer of Cars Commerce, will depart the company by March 31, 2025, with Lisa Gosselin appointed as his successor effective February 24, 2025. Gosselin, with over 25 years of experience in SaaS, adtech, and data, is expected to enhance Cars Commerce’s platform and growth strategy, focusing on optimizing go-to-market strategies and driving revenue growth.
M&A TransactionsBusiness Operations and Strategy
Cars.com Acquires Dealer Club for Market Expansion
Positive
Jan 24, 2025
On January 24, 2025, Cars.com Inc. announced its acquisition of Dealer Club Inc., a reputation-based digital wholesale auction platform, for a total potential price of $113 million. This strategic move aims to expand Cars Commerce’s presence in the $10 billion wholesale used car market by integrating DealerClub’s dealer-to-dealer auction capabilities, enhancing transparency and trust through its reputation system, and potentially accelerating AccuTrade adoption.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.