CarGurus (CARG): Valuation in Focus as Marketplace Revenue Grows 14% on AI Tools and Dealer Engagement

CarGurus (CARG) recently posted a 14% year-over-year increase in Marketplace revenue, fueled by more dealers subscribing to its platform and greater engagement both in the US and internationally. New AI-powered tools are also starting to make a difference for both dealers and shoppers.

See our latest analysis for CarGurus.

CarGurus’ latest Marketplace results sparked renewed optimism, even as the share price sits at $35.28. The price is up modestly by 3.3% over the past month but shows a 1-year total shareholder return of -6.7%. Long-term investors have still been well rewarded, with a remarkable 170% total return over three years. This suggests that underlying growth trends are slowly rebuilding momentum after last year’s reset.

If you want to spot other platforms that have been steadily building value, it’s worth expanding your search to fast growing stocks with high insider ownership

With shares still trading below analyst targets and the business growing steadily, is CarGurus currently offering investors a bargain? Or is the market already anticipating the next leg of its recovery?

Most Popular Narrative: 12.4% Undervalued

With CarGurus' last close at $35.28 and the most widely followed narrative pinpointing a fair value above $40, many are watching the gap between price and projection closely. The stage is set for a deeper look into what could unlock more upside for CarGurus’ stock.

Expansion and deeper adoption of data-driven analytics tools and AI-powered solutions across the dealer base are creating higher engagement, improved retention, and more actionable insights. These factors are expected to drive sustained Marketplace revenue growth and support increasing margins as dealers see measurable ROI and make CarGurus central to their workflow.

Read the complete narrative.

Want to know the key ingredients behind this ambitious valuation? The narrative banks on accelerated earnings, improved profit margins, and a future profit multiple that is hard to ignore. Curious what bold financial levers could send value even higher? Hit the full narrative for the formula driving these projections.

Result: Fair Value of $40.29 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, shifts in the used vehicle marketplace or increased digital competition could limit CarGurus’ growth and challenge assumptions behind the current valuation thesis.

Find out about the key risks to this CarGurus narrative.

Another View: P/E Ratio Paints a Different Picture

While our first look says CarGurus is undervalued, the price-to-earnings ratio tells a more cautious story. At 22.2 times earnings, CarGurus trades well above its peer average of 12.6 and even above the industry’s 19.6. Compared to a fair ratio of 21.2, investors might be paying a premium, which could spell risk if high growth does not materialize. Could this optimism be overdone, or is the market seeing something others are missing?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own CarGurus Narrative

If you are the type who likes to look under the hood for your own insights, it is fast and simple to develop your own data-backed perspective in under three minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding CarGurus.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.