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1. Company Snapshot

1.a. Company Description

Cars.com Inc.operates as a digital marketplace and provides solutions for the automotive industry.Its platform connects car shoppers with sellers.


The company, through its marketplace, dealer websites, and other digital products, showcases dealer inventory, elevate and amplify dealers' and automotive manufacturers' (OEMs) brands, connect sellers with ready-to-buy audience, and empower shoppers with the resources and information needed to make car buying decisions.It also offers marketplace products, such as marketplace subscription advertising and social selling services; digital solutions, including Website platform hosting, AI chat tool, digital retailing, and review and reputation management; and advertising comprising display advertising, instant loan screening and approvals, digital advertising, and in-market audio services.As of December 31, 2021, the company served 19,179 dealer customers in 50 states, which included franchise and independent dealers, with digital and brick-and-mortar stores; and primary automakers selling vehicles in the United States.


Its customers are local car dealers, OEMs, and other national advertisers.Cars.com Inc.was founded in 1998 and is based in Chicago, Illinois.

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1.b. Last Insights on CARS

The recent 3-month performance of Cars.com Inc. was negatively impacted by the company's Q3 earnings miss, with earnings per share (EPS) of $0.48, falling short of the Zacks Consensus Estimate of $0.50. Despite achieving a record total revenue of $182 million and a 2% year-over-year growth in dealer revenue, the company's medical care ratios and intense competition in the automotive industry likely posed challenges. Additionally, some institutional investors reduced their stakes, including Envestnet Asset Management Inc., which cut its stake by 91.3%. However, the company's launch of Carson, an AI-powered search experience, and a $64 million share buyback program may support the stock. (Source: MarketBeat Ratings)

1.c. Company Highlights

2. Cars.com Delivers Record Revenue and Expands Dealer Count

Cars.com reported record revenue of $181.6 million for the third quarter of 2025, representing a 1% year-over-year increase. The company's adjusted EBITDA margin expanded to 30%, up 160 basis points from the previous year, driven by a strong operating model and investments in innovation. Earnings per share (EPS) came in at $0.12, slightly below the year-ago quarter's EPS of $0.28. The company's revenue growth was fueled by a 2% year-over-year increase in dealer revenue, driven by the repackaging of marketplace and solutions offerings.

Publication Date: Nov -24

📋 Highlights
  • Record Revenue:: Q3 revenue reached $182 million, driven by websites, trade/appraisal solutions, and marketplace, with dealer count rising for the third consecutive quarter.
  • Adjusted EBITDA Margin:: Improved to 30%, up 160 basis points YoY, with $55 million adjusted EBITDA, a 7% Year-over-Year (YoY) increase.
  • Dealer Growth:: Net gain of over 300 dealers since 2025 start, with 270+ added YoY, and marketplace driving 67 sequential website subscribers and 82 AccuTrade subscribers.
  • Share Buybacks:: $19 million repurchased in Q3, totaling $64 million Year-to-Date (YTD), utilizing over 2/3 of $94.5 million free cash flow.

Revenue Drivers and Dealer Count

The company's marketplace revenue was a significant contributor to the growth in dealer count, with over 300 net new dealer customers added since the start of the year. The average revenue per dealer (ARPD) was $2,460, up 1% quarter-over-quarter and down slightly year-over-year. Management is confident that ARPD will improve as the company expands its platform's reach. As Alex Vetter noted, "manufacturers are experiencing near-term headwinds, but the business remains healthy due to the concentration of new car shoppers on our marketplace."

Operational Efficiency and Cash Flow

The company's operating expenses were $165 million, down 2% year-over-year, while adjusted operating expenses were $150 million, down 4% year-over-year. Net cash provided by operating activities totaled $115 million for the first nine months of the year, and free cash flow was $94.5 million. The company utilized more than two-thirds of its free cash flow for share repurchases, demonstrating its commitment to returning capital to shareholders.

Valuation and Outlook

With a P/E Ratio of 23.65 and an EV/EBITDA ratio of 4.07, the company's valuation appears reasonable. The company's guidance for the second half of 2025 remains unchanged, with expectations of low single-digit revenue growth year-over-year and an adjusted EBITDA margin between 29% and 31%. Analysts estimate revenue growth of 3.3% for the next year. The actual EPS of $0.12 is below the previous year's EPS, but the company's focus on cost management and revenue growth initiatives should support future earnings growth.

Growth Initiatives and Competitive Landscape

The company is focused on driving growth through its AI-powered search engine, Carson, and its marketplace repackaging initiative. The company is also seeing strong interest in its AccuTrade vehicle sourcing strategy from dealer groups. As the company continues to innovate and expand its offerings, it is well-positioned to maintain its market share and drive future growth.

3. NewsRoom

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Cars Commerce Appoints Seasoned SaaS and Marketplace Technologist Cormac Twomey as Chief Technology Officer

Dec -04

Source: prnewswire.com

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Boston Partners Sells 30,256 Shares of Cars.com Inc. $CARS

Nov -29

Source: defenseworld.net

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Envestnet Asset Management Inc. Trims Stock Position in Cars.com Inc. $CARS

Nov -27

Source: defenseworld.net

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AXQ Capital LP Makes New $254,000 Investment in Cars.com Inc. $CARS

Nov -25

Source: defenseworld.net

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Cars.com Survey Reveals AI's Growing Influence on Car Shopping: 97% of AI Users Say it Will Impact Purchase Decisions and Almost Half Have Already Leveraged the Tech for Car Shopping

Nov -20

Source: prnewswire.com

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Cars.com Inc. (NYSE:CARS) Receives Consensus Recommendation of “Moderate Buy” from Brokerages

Nov -17

Source: defenseworld.net

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Cars.com Inc. (CARS) Q3 2025 Earnings Call Transcript

Nov -07

Source: seekingalpha.com

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Cars.com (CARS) Q3 Earnings: How Key Metrics Compare to Wall Street Estimates

Nov -06

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.59%)

6. Segments

Dealer

Expected Growth: 3.5%

The 3.5% growth of Dealers from Cars.com Inc. is driven by increasing online car shopping, rising demand for digital marketing solutions, and growing adoption of dealer management systems. Additionally, the company's expanding product offerings, strategic partnerships, and improving operational efficiency also contribute to this growth.

OEM and National

Expected Growth: 4.5%

OEM segment growth driven by increasing online marketing spend and partnerships with automakers. National segment growth fueled by rising demand for digital advertising and expanding dealer network, resulting in a 4.5% growth rate.

Other

Expected Growth: 3.8%

Cars.com Inc.'s 3.8% growth is driven by increasing online car shopping, rising demand for digital marketing solutions, and strategic partnerships with dealerships and OEMs. Additionally, the company's focus on improving user experience, expanding its inventory and pricing data, and enhancing its AI-powered car matching technology contribute to its growth momentum.

7. Detailed Products

New Car Listings

Comprehensive listings of new cars for sale, including detailed information on features, pricing, and dealer information.

Used Car Listings

Extensive listings of used cars for sale, including certified pre-owned vehicles, with detailed information on features, pricing, and dealer information.

Dealer Reviews

Reviews and ratings of car dealerships, providing insights into their customer service, pricing, and overall experience.

Car Research Tools

Comprehensive research tools, including car reviews, comparisons, and pricing information, to help car buyers make informed decisions.

Inventory Management

Tools and services for car dealerships to manage their inventory, including listing and pricing management.

Digital Marketing Solutions

Digital marketing solutions, including targeted advertising and lead generation, to help car dealerships reach potential customers.

8. Cars.com Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Cars.com Inc. is medium because while there are alternative platforms for buying and selling cars, Cars.com's strong brand recognition and large inventory of listings make it a preferred choice for many consumers.

Bargaining Power Of Customers

The bargaining power of customers is low because Cars.com Inc. offers a wide range of listings and tools to help customers make informed purchasing decisions, reducing their bargaining power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium because while Cars.com Inc. relies on dealerships and private sellers to list their vehicles, the company's large user base and strong brand recognition give it some bargaining power.

Threat Of New Entrants

The threat of new entrants is high because the online car buying and selling market is highly competitive, and new entrants could potentially disrupt the market with innovative business models or technologies.

Intensity Of Rivalry

The intensity of rivalry is high because the online car buying and selling market is highly competitive, with many established players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 49.55%
Debt Cost 3.95%
Equity Weight 50.45%
Equity Cost 14.22%
WACC 9.13%
Leverage 98.20%

11. Quality Control: Cars.com Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Sonic Automotive

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Growth: 5.1

Quality: 3.4

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Momentum: 9.0

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Growth: 4.2

Quality: 3.7

Yield: 0.0

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Cars

A-Score: 4.3/10

Value: 7.2

Growth: 5.4

Quality: 6.3

Yield: 0.0

Momentum: 2.5

Volatility: 4.3

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A-Score: 3.6/10

Value: 8.7

Growth: 3.6

Quality: 5.4

Yield: 0.0

Momentum: 1.5

Volatility: 2.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

12.11$

Current Price

12.11$

Potential

-0.00%

Expected Cash-Flows