There's been a major selloff in CarGurus, Inc. (NASDAQ:CARG) shares in the week since it released its full-year report, with the stock down 22% to US$31.15. It looks like a credible result overall - although revenues of US$894m were what the analysts expected, CarGurus surprised by delivering a (statutory) profit of US$0.20 per share, an impressive 28% above what was forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for CarGurus

Taking into account the latest results, the consensus forecast from CarGurus' 13 analysts is for revenues of US$955.8m in 2025. This reflects a credible 6.9% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to jump 548% to US$1.30. In the lead-up to this report, the analysts had been modelling revenues of US$984.5m and earnings per share (EPS) of US$1.31 in 2025. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.

The consensus has reconfirmed its price target of US$39.04, showing that the analysts don't expect weaker revenue expectations next year to have a material impact on CarGurus' market value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on CarGurus, with the most bullish analyst valuing it at US$45.00 and the most bearish at US$16.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that CarGurus' revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 6.9% growth on an annualised basis. This is compared to a historical growth rate of 11% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 10% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than CarGurus.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Even so, earnings are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on CarGurus. Long-term earnings power is much more important than next year's profits. We have forecasts for CarGurus going out to 2027, and you can see them free on our platform here.

Even so, be aware that CarGurus is showing 2 warning signs in our investment analysis , you should know about...

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.