CARG
CarGurus, Inc.
$34.18
Platform & Compounding FCF
50%
Two-stage FCF DCF
Strong
·
Conviction
Undervalued
Trading 41.0% below fair value
You pay
$34.18
Bear
$40.50
Fair
$57.91
Bull
$75.90
Bear
$40.50
+18.5%
7% stage 1 growth, 11% discount
Fair
$57.91
+69.4%
12% stage 1 growth, 11% discount
Bull
$75.90
+122.0%
16% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (12% base case)
Terminal Value % of EV
41%
Implied Market Multiple
13.1x
Market is pricing in (growth)
3.3%
vs 12.0% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $36.50 from 23 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $57.91 per share.
Warnings
Stock-based employee pay equals 32% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Wall Street's average price target is $36.50 (from 23 analysts). Our estimate is 78% above the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions