TrueCar Inc's Rocky Road Ahead: Unraveling the Factors Limiting Outperformance
Long-established in the Interactive Media industry, TrueCar Inc (NASDAQ:TRUE) has enjoyed a stellar reputation. It has recently witnessed a surge of 12.44%, juxtaposed with a three-month change of 0.21%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of TrueCar Inc.
Deciphering the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
1. Financial strength rank: 6/10
2. Profitability rank: 2/10
3. Growth rank: 1/10
4. GF Value rank: 7/10
5. Momentum rank: 7/10
Based on the above method, GuruFocus assigned TrueCar Inc the GF Score of 63 out of 100, which signals poor future outperformance potential.
Understanding TrueCar Inc's Business
TrueCar Inc is a data-driven online platform operating on common technology infrastructure, powered by proprietary data and analytics. It customizes and operates its platform for affinity group marketing partners, including financial institutions like PenFed and American Express; membership-based organizations like Consumer Reports, AARP, Sam's Club, and AAA; and employee buying programs for large enterprises such as IBM and Walmart. The company enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar Certified Dealers. With a market cap of $223.8 million and sales of $151.99 million, the company's operating margin stands at -53.38%.
Profitability Breakdown
TrueCar Inc's low Profitability rank can also raise warning signals. The company's Operating Margin has declined over the past five years ((-309,441.00%)), as shown by the following data: 2018: -9.87; 2019: -18.16; 2020: -3.68; 2021: -14.45; 2022: -40.81. Additionally, TrueCar Inc's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 92.20; 2019: 91.69; 2020: 92.27; 2021: 90.40; 2022: 89.96. This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where TrueCar Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -17.7 per year over the past three years, which underperforms worse than 86.96% of 514 companies in the Interactive Media industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, TrueCar Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given TrueCar Inc's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While the company has a strong reputation in the Interactive Media industry, its declining profitability and growth ranks signal potential headwinds. Investors should tread carefully and consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
