Critical Survey: CarGurus (NASDAQ:CARG) versus Reddit (NYSE:RDDT)

Reddit (NYSE:RDDT – Get Free Report) and CarGurus (NASDAQ:CARG – Get Free Report) are both communication services companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, profitability, earnings, dividends, valuation, risk and institutional ownership.

Valuation and Earnings

This table compares Reddit and CarGurus”s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Reddit $2.20 billion 13.97 $529.72 million $4.30 37.19
CarGurus $967.27 million 2.66 $155.90 million $1.84 15.68

Reddit has higher revenue and earnings than CarGurus. CarGurus is trading at a lower price-to-earnings ratio than Reddit, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Reddit and CarGurus’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Reddit 31.35% 29.02% 26.32%
CarGurus 18.06% 62.88% 32.82%

Institutional and Insider Ownership

86.9% of CarGurus shares are held by institutional investors. 28.5% of Reddit shares are held by insiders. Comparatively, 18.2% of CarGurus shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk & Volatility

Reddit has a beta of 2.05, indicating that its share price is 105% more volatile than the S&P 500. Comparatively, CarGurus has a beta of 1.22, indicating that its share price is 22% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Reddit and CarGurus, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Reddit 0 10 17 2 2.72
CarGurus 0 6 8 1 2.67

Reddit presently has a consensus target price of $219.29, suggesting a potential upside of 37.12%. CarGurus has a consensus target price of $39.95, suggesting a potential upside of 38.47%. Given CarGurus’ higher probable upside, analysts clearly believe CarGurus is more favorable than Reddit.

Summary

Reddit beats CarGurus on 11 of the 15 factors compared between the two stocks.

About Reddit

(Get Free Report)

Reddit, Inc. operates a website that organizes digital communities. It organizes communities based on specific interests that enable users to engage in conversations by sharing experiences, submitting links, uploading images and videos, and replying to one another. The company was founded in 2005 and is headquartered in San Francisco, California.

About CarGurus

(Get Free Report)

CarGurus, Inc. operates an online automotive platform for buying and selling vehicles in the United States and internationally. It operates through two segments, U.S. Marketplace and Digital Wholesale. The company provides an online automotive marketplace where customers can search for new and used car listings from its dealers and sell their car to dealers and other consumers; and paid listings subscriptions for enhanced access to its marketplace that connects dealers to a large audience of informed and engaged consumers. It also offers dealer and non-dealer advertising products for its websites and social media platforms. The company operates online marketplaces under the CarGurus brand in the United States, Canada, and the United Kingdom; Autolist and CarOffer brands in the United States; and PistonHeads brand in the United Kingdom. The company was formerly known as CarGurus LLC and changed its name to CarGurus, Inc. in June 2015. CarGurus, Inc. was founded in 2005 and is headquartered in Cambridge, Massachusetts.

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