CarGurus Inc (NASDAQ:CARG) Emerges as a Prime Candidate for Value Investors

Last update: Dec 4, 2025

In the world of investing, few strategies have lasted as long or shown as much success as value investing. Fundamentally, this method looks for companies whose stock price, their market value, trades for less than an assessment of their real worth. The aim is to discover these underpriced chances before the wider market sees their actual promise. An orderly way to apply this strategy is to use a fixed filter that finds stocks with good basic business qualities that are also selling at a low price. One example is a "Decent Value" filter, which selects for companies rating well on measures of price while also showing good financial condition, earnings, and expansion. This pairing seeks to find stocks that are not only low-priced, but low-priced without a clear cause, possibly giving a buffer for investors willing to wait.

CarGurus Inc (NASDAQ:CARG), the online automotive marketplace, recently appeared from such a filtering process. Its basic business picture indicates it may be the type of underpriced chance value investors look for. A close look at its financial statements, available in its full fundamental analysis report, shows a company with a strong operating base trading at what seems to be a fair price.

Valuation: The Foundation of the Idea

The main draw for a value investor is a stock's price compared to its basic business qualities. CarGurus' valuation measures offer a persuasive view of a company that is not expensive in the market.

Price-to-Earnings (P/E): With a P/E ratio of 16.68, CARG is priced lower than almost 69% of similar companies in the Interactive Media & Services industry. This ratio is also significantly under the current S&P 500 average of 26.37.
Forward P/E: Looking forward, the situation stays much the same. A forward P/E of 14.01 shows the stock is priced lower than approximately 67% of its industry rivals and differs greatly from the S&P 500's forward P/E average of 36.20.
Other Multiples: The valuation argument is strengthened by other measures. The company's Enterprise Value to EBITDA ratio points to a fairly low price compared to the industry, and its Price to Free Cash Flow ratio is better than about 74% of similar companies.

For a value plan, a low price is the starting place, but it must be evaluated next to the company's quality to prevent a "value trap", a stock that is low-priced but likely to remain so because of weak basic business qualities.

Financial Health: A Strong Balance Sheet

A solid financial base is essential for a careful value investment, as it offers stability in difficult economic times and options for future expansion. CarGurus does very well here, receiving a nearly ideal Health score of 9 out of 10.

Zero Debt: The company has no interest-bearing debt on its balance sheet. This outstanding situation leads to a Debt/Equity ratio of 0, putting it with the best in its industry and removing risks linked to interest costs and borrowing.
Strong Solvency: An Altman-Z score of 10.78 shows almost no short-term danger of financial trouble and does better than 90% of industry peers.
Good Liquidity: With a Current Ratio and Quick Ratio both at 2.87, the company has more than sufficient short-term assets to meet its near-term debts, doing better than over 70% of its rivals.

This flawless financial health gives the important buffer that value investors like Benjamin Graham stressed. It means the company's business results, not debt loads, determine its worth.

Profitability: Strong Earnings Ability

An underpriced stock is only a good deal if the company behind it can produce good returns. CarGurus' Profitability score of 8 shows an effective, high-margin business.

Outstanding Returns: The company creates notable returns on capital. Its Return on Equity (ROE) of 40.48% and Return on Invested Capital (ROIC) of 23.46% do better than 98.6% and 88.6% of the industry, in turn. Importantly, its recent ROIC is much higher than its three-year average, a sign of better capital use.
Strong Margins: CarGurus works with high margins, an indicator of pricing strength and operational effectiveness. Its Operating Margin of 22.47% and Gross Margin of 88.15% put it in the top group of its sector.
Cash Flow Steadiness: The company has generated positive operating cash flow in every one of the last five years, showing the strength of its earnings.

This earnings picture is vital. It verifies that the company's low price is not a sign of poor earnings quality, but possibly a market mistake.

Growth: A Future-Oriented Part

While strict value investing frequently centers on present assets, current views accept that future expansion possibilities are part of a company's real worth. CarGurus displays a balanced expansion picture with a score of 6.

Good Historical EPS Growth: The company's Earnings Per Share has increased at an average yearly pace of 26.7% over recent years, with a 41.2% jump in the last year.
Steady Revenue Path: Revenue has increased at an average yearly pace of 8.7%, showing the underlying growth of the business.
Positive Future Outlook: Analysts forecast EPS to increase at an average pace of 21.6% each year in the coming years, implying the market may not be completely accounting for this expected earnings growth.

This expansion part, especially when paired with a low price, can be a strong driver. It tackles a main risk in value investing, that a business is not growing. Here, expansion offers a possible way for the market to value the stock more highly.

Conclusion and Investor Points

CarGurus makes an argument that fits with several main ideas of value investing. It seems to be a financially strong company with high earnings, trading at a price that is fair compared to both its industry and the wider market. The pairing of a balance sheet with no debt, very good returns on capital, and positive expansion expectations makes a situation where the stock's current price may not match its real business worth.

Still, investors must think about the wider situation. The company works in the competitive and changing automotive sector, and its future revenue expansion is forecast to be moderate. The value idea depends on the market finally seeing the strength and durability of its earnings ability.

For investors wanting to use this fixed "Decent Value" method to find similar chances, more possible choices can be reviewed using the set Decent Value Stocks filter.

Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any securities. The review is based on data and scores from ChartMill, and investors should do their own research and talk with a qualified financial advisor before making any investment choices. Past results do not guarantee future outcomes.