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Cars.com Inc.'s (NYSE:CARS) latest earnings announcement in December 2018 revealed that the company experienced a immense headwind with earnings falling by -83%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Cars.com's earnings growth trajectory over the next couple of years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts' outlook for the coming year seems pessimistic, with earnings falling by -0.8%. But in the following year, there is a complete contrast in performance, with generating double digit 47% compared to today’s level and continues to increase to US$69m in 2022.
While it’s helpful to be aware of the growth rate year by year relative to today’s level, it may be more insightful to evaluate the rate at which the business is rising or falling on average every year. The pro of this technique is that we can get a bigger picture of the direction of Cars.com's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 21%. This means that, we can anticipate Cars.com will grow its earnings by 21% every year for the next few years.
For Cars.com, I've compiled three fundamental aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is CARS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CARS is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CARS? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.