As you might know, CarGurus, Inc. (NASDAQ:CARG) just kicked off its latest quarterly results with some very strong numbers. The company beat both earnings and revenue forecasts, with revenue of US$147m, some 8.5% above estimates, and statutory earnings per share (EPS) coming in at US$0.29, 107% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
After the latest results, the twelve analysts covering CarGurus are now predicting revenues of US$643.1m in 2021. If met, this would reflect a decent 15% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to shrink 8.1% to US$0.53 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$637.7m and earnings per share (EPS) of US$0.97 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$33.60, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic CarGurus analyst has a price target of US$38.00 per share, while the most pessimistic values it at US$26.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await CarGurus shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the CarGurus' past performance and to peers in the same industry. It's pretty clear that there is an expectation that CarGurus' revenue growth will slow down substantially, with revenues next year expected to grow 15%, compared to a historical growth rate of 28% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 16% next year. So it's pretty clear that, while CarGurus' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for CarGurus. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$33.60, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on CarGurus. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple CarGurus analysts - going out to 2024, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for CarGurus you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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