CarGurus, Inc. (CARG): what the price requires
At today's price, CarGurus, Inc. (CARG) is priced for +25.2% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/CARG
Headline
| Field | Value |
|---|---|
| Ticker | CARG |
| Company | CarGurus, Inc. |
| Current price | $33.45/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 5.7% |
| Operating margin today | 18.1% |
| Margin compression implied | -12.4pp |
| Implied growth | 25.2% |
| Multiple paid | 19x operating income |
The operating-margin requirement is derived from the framework's value band at year 7, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 11.3% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~5.4pp.
Reconcile: at the x-ray's 9.3% required return this reads ~13.9%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.79σ |
| sustained it ~5 years at this level | 33% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.97x | 5 | expensive |
| Earnings | 1.37x | 5 | expensive |
| Relative | 0.53x | 5 | justifies |
| Growth | 0.73x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $76.15 | 0.44x | yes | FCF base $0.3B, growth 8% (input: historical growth), terminal g 4.0%, WACC 8.7%, 6yr projection |
| DCF Exit Multiple | Growth | $45.80 | 0.73x | yes | Exit EV/EBITDA: 11.0x / 13.0x / 15.0x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $63.36 | 0.53x | yes | P/E 35x (static sector reference · 2026-04), scenarios: 29.3x / 35.0x / 40.7x (bear / base = reference held flat / bull), EV/EBITDA 25x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $16.95 | 1.97x | yes | BV/sh $2.49, ROE (TTM) 62.9%, ke 9.3% |
| Two-Stage Excess Return | Asset | $61.58 | 0.54x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $28.08 | 1.19x | yes | Rev $1.0B, growth 8% (input: historical growth; tapered), Terminal P/S: 2.8x / 3.3x / 3.9x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $53.20 | 0.63x | yes | EPS $1.52, growth 35% (input: historical EPS growth), PEG=0.61 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $8.74 | 3.83x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.13B × (1−22%) / WACC 8.7% → EPV (no growth) |
| Residual Income | Asset | $27.92 | 1.20x | yes | BV $2.49 + 5yr PV of (ROE (TTM) 62.9% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $9.23 | 3.62x | yes | √(22.5 × EPS $1.52 × BVPS $2.49) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $67.22 | 0.50x | yes | EBITDA $0.27B × sector EV/EBITDA 25.0x |
| FCF Yield | Earnings | $30.12 | 1.11x | yes | FCF $292.7M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $24.34 | 1.37x | yes | SBC-adj FCF $0.24B (FCF $0.29B − SBC $0.05B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $49.05 | 0.68x | yes | EPS $1.52 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $1.68 | 19.91x | yes | BV $2.49 × (ROIC 5.8% / WACC 8.7%) |
| P/Sales Sector | Relative | $80.54 | 0.42x | yes | Revenue $0.96B × sector P/S 8.0x |
| PEG Fair Value | Relative | $57.00 | 0.59x | yes | EPS $1.52 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $16.43 | 2.04x | yes | EPS $1.52 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $72.0m |
| Net debt / NOPAT (after-tax) | -0.54x (net cash) |
| Net debt / operating income (pre-tax) | -0.42x (net cash) |
| Share count CAGR (buyback) | -5.3% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- CarGurus runs an online car-shopping marketplace that earns subscription revenue from roughly 34,600 paying dealers, a recurring revenue base that grew 4.5% even as it raised prices through premium tiers.
- The company just simplified itself, winding down its lower-margin wholesale business at the end of 2025 to become a focused, higher-margin marketplace with fast-growing international operations.
- The biggest risk is the auto market it depends on; dealer budgets and consumer car-shopping both soften when vehicle affordability or the economy weakens, and the price assumes durable double-digit growth from here.
Bull Case
CarGurus is best understood as a marketplace business that has just finished reshaping itself into a cleaner, higher-quality version of what it was. It connects car shoppers with dealers and earns the bulk of its money not from transactions but from recurring dealer subscriptions, described in its filing as revenue from "dealer subscriptions to our Listings packages, RPM, our digital advertising suite, Digital Retail, and Top Dealer Offers" plus advertising from manufacturers and financing partnerships. That is a software-like revenue model wearing the clothes of an automotive company: sticky, recurring, and high-margin. The company carries a roughly 25% operating margin, far above what any actual car dealer or wholesaler earns, because it sells access and audience rather than vehicles.
The recent results show the model working on both price and volume. First-quarter 2026 revenue grew 15% to $244 million, above the midpoint of guidance, with adjusted EBITDA of $80.2 million topping the high end of the range. Paying dealers rose 4.5% to 34,596, and the growth was helped by adoption of premium tiers and AI-powered products, meaning the company is both adding dealers and getting existing ones to pay more. International is the standout, with UK and Canada revenue growing 39%, a sign the marketplace model travels well beyond its home market and has a long runway abroad.
The strategic simplification is the part that should reframe how investors value the business. CarGurus wound down its CarOffer wholesale segment, completing the exit at the end of 2025, to concentrate on the higher-margin marketplace and international growth. That removes a volatile, capital-heavier business that had been diluting the company's economics and clouding its valuation, leaving a focused marketplace with strong dealer retention. Management is returning cash aggressively alongside the cleanup, repurchasing $175 million of stock in the first quarter and authorizing a new $250 million program after completing the prior one. A debt-free, high-margin marketplace that has shed its weakest segment and is buying back stock is a stronger business than the one investors were valuing a year ago.
Bear Case
The variable with the most leverage over CarGurus is the one it cannot control: the health of the car market and the dealer budgets that ride on it. CarGurus sells advertising and subscriptions to auto dealers, and dealer marketing spend is discretionary and procyclical. When vehicle affordability tightens, when interest rates keep car payments high, or when the economy slows, dealers sell fewer cars and trim exactly the kind of marketing budgets CarGurus depends on. The current price assumes the business compounds operating profit at better than 20% a year for five years, a pace only about 40% of comparable companies sustain, and that assumption is most fragile precisely if the auto cycle turns. A marketplace's growth is only as durable as its customers' willingness to keep paying, and that willingness is tied to a cyclical industry.
Competition is the structural pressure underneath the macro risk. CarGurus operates, in its own words, "in a highly competitive market" and faces companies "that provide listings, car-shopping information, lead generation, marketing, wholesale, and digital car-buying and -selling services." The barrier to a dealer listing on a rival platform, or to a consumer using a different car-shopping site, is low, and large competitors with their own audiences are pursuing the same dealer budgets. The premium-tier and AI-product strategy that is lifting revenue today depends on dealers continuing to see enough return to justify paying up, and a more aggressive competitor on price could pressure that.
The near-term math also carries a caution the bull case glosses over. Management guided full-year 2026 revenue growth to 10% to 13%, a step down from the 15% just delivered, and guided adjusted EBITDA margin to compress by 1.5 to 2.5 percentage points as the company invests. Decelerating growth and contracting margin in the same year is a combination that demands the investment pays off, and the stock is priced for it to. The valuation methods are split: the growth and relative methods support the price, but the asset-based method lands below it, flagging that little of the value rests on tangible assets and most rests on the durability of the marketplace's earnings. The bear case is that a cyclically exposed, competitively pressured marketplace is guiding to slower growth and thinner margins while priced for the opposite.
Valuation
CarGurus should be valued as a marketplace, which means the question is how durable its recurring dealer revenue is, not what its modest tangible assets are worth. The stock trades at $30 (June 27, 2026), and inverting that price says the market is paying about 17 times company-wide operating income and expecting operating profit to grow roughly 22% a year for five years. That is a within-range assumption given the company has recently grown around that pace, but it is demanding for a business now guiding full-year revenue growth to a slower 10% to 13%, so the price leans on the marketplace re-accelerating or on international growth carrying the load.
The valuation methods divide in a way that frames the bet cleanly. The growth-discounted, peer-multiple, and earnings-power methods land at or above the current price, supporting it on the strength of the recurring revenue and the margins; the asset-based methods land below it, because a marketplace's value is its dealer relationships and audience, not its balance sheet. The pattern says this is a value-and-quality name supported by its earnings power rather than a speculative growth bet, with several methods reaching well above the price. The simplification from exiting the wholesale business is relevant here: the remaining marketplace earns a higher and cleaner margin, so the trailing economics understate the quality of the business that is left, while a strong recent margin reflects the cleaner mix.
Solvency is a non-issue and modestly supports the buyer. CarGurus holds about $72 million in cash with no debt, even after spending $175 million on buybacks in a single quarter, so the company funds its growth and its capital return out of operating cash flow. The share count has been shrinking at roughly a 5% annual pace, which compounds per-share value on top of the operating growth. What a buyer at this price underwrites is that the marketplace keeps adding dealers and raising what they pay, that international keeps growing at its current rapid clip, and that the planned investment lifts growth back up rather than just compressing margin. The downside is not financial distress; it is that a cyclically exposed marketplace guiding to slower growth and thinner margins disappoints against a price that already credits the recovery, with the street's own targets clustered only modestly above today's level.
Catalysts
Dealer count and revenue per dealer are the marketplace metrics that matter most, and both moved the right way last quarter. CarGurus grew first-quarter 2026 revenue 15% to $244 million, added paying dealers to 34,596, up 4.5%, and beat its adjusted EBITDA guidance with $80.2 million. The combination of more dealers and higher spend per dealer, driven by premium tiers and AI products, is the engine to watch; continued gains confirm the pricing power, while stalling dealer growth would be an early warning.
International expansion is the structural catalyst. UK and Canada revenue grew 39% year over year, and management has pointed to international as a primary growth driver after the CarOffer wind-down. The pace of that international growth is what could keep total company growth in the double digits even as the larger US marketplace matures.
The guidance and capital-return cadence set the near-term expectations. Full-year revenue growth is guided to 10% to 13% with an adjusted EBITDA margin expected to compress 1.5 to 2.5 points on investment, and the company has a fresh $250 million buyback authorization in place. Whether the investment reaccelerates growth, and how aggressively the buyback shrinks the share count, are the levers for the year. Analyst sentiment is constructive, with a Buy-leaning consensus and price targets clustered in the mid-$30s to low-$40s, modestly above the current price.
Peer Cohorts (Per Segment, With Filing Citations)
CarGurus (single reportable segment) (reported)
- ATHM (Autohome Inc.)
- FY2025 20-F: …and restricted share units held by Mr. Xiang, and ordinary shares in the form of ADSs Mr. Xiang has the right to acquire upon exercise of options or will be entitled to upon vesting of restricted shares within 60 days after March 31, 2026. (8) Represents 200,884,012 ordinary shares as reported in a Schedule 13D filed…
- FY2025 20-F: -31 0001527636 athm:PingAnInsuranceGroupCompanyOfChinaLtdMember 2017-02-22 0001527636 srt:MinimumMember 2023-12-31 0001527636 us-gaap:NoncontrollingInterestMember 2025-01-01 2025-12-31 0001527636 us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2025-01-01 2025-12-31 0001527636…
- TRIP (TRIPADVISOR, INC.)
- FY2025 10-K: Form of Restricted Stock Unit Agreement (Performance Based) (Domestic) 10-Q 001-35362 10.5 8/7/25 10.16+ Form of Restricted Stock Unit Agreement (Performance Based) (International) 10-Q 001-35362 10.6 8/7/25 10.17+ Form of Deferred Stock Unit Agreement (Non-Employee Directors) 10-Q 001-35362 10.7 8/7/25 10.18+ Form of…
- FY2025 10-K: …establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with GAAP.…
- YMM (Full Truck Alliance Co. Ltd.)
- FY2025 20-F: …the sale of advanced driver-assistance system kits, or ADAS kits, and service fees generated from ADAS-enabled carrier services. Multiple performance obligations When certain service contracts are combined as one arrangement for revenue recognition purposes and the entire arrangement contains more than one…
- FY2025 20-F: …guarantees off-balance sheet loans facilitated by it. As of December 31, 2025, the amount of guarantee liabilities in relation to the Group's loan guarantee arrangements was immaterial. 134 Table of Contents Other Value-Added Services The Group generates revenue from other value-added services by charging (i)…
- UPWK (UPWORK INC.)
- FY2025 10-K: …that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If it is determined that the asset group is not recoverable, an impairment loss is recorded in the…
- FY2025 10-K: …Accountant Fees and Services. The information required by this item will be included in our Proxy Statement to be filed with the SEC, within 120 days of the year ended December 31, 2025, and is incorporated herein by reference. 98 PART IV Item 15. Exhibits and Financial Statement Schedules. (a) The following…
- GRND (Grindr Inc.)
- FY2025 10-K: …any other financial data for these markets. Accordingly, the Company determined that the Company operates as a single operating and reportable segment. The CODM assesses performance for the Company's single operating segment based on net income (loss) that is also reported on the consolidated statement of operations…
- FY2025 10-K: SupplierConcentrationRiskMember us-gaap:AccountsPayableMember 2025-01-01 2025-12-31 0001820144 us-gaap:SupplierConcentrationRiskMember us-gaap:CostOfGoodsTotalMember 2024-01-01 2024-12-31 0001820144 grnd:MajorVendor1Member us-gaap:SupplierConcentrationRiskMember us-gaap:CostOfGoodsTotalMember 2024-01-01 2024-12-31…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
CarGurus Q1 2026 results