Simple Concepts Research Group

Will TrueCar (NASDAQ: TRUE) Stock Recover From Recent Losses?

by | Nov 23, 2021 | 52 Week Lows, Stock Picks

TrueCar (TRUE) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for TrueCar (TRUE) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

TrueCar Fundamentals

TRUE Stock Rating

Stock Price Target: $7.21

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for TrueCar in comparison to the Software industry and the S&P 500.

TrueCar is a Small Cap company with a Market Cap of $358.7M.

How are investors using the TrueCar earnings yield to assess the company?

TrueCar (TRUE stock)_ Earnings Yield in Comparison to the Software Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for TrueCar is 12.87%%, in comparison to 3.38% for the S&P 500 and 1.54% for the 10-year treasury bond. The median earnings yield for the Software industry is 3.45%.

What does TrueCar Price-to-Earnings Ratio (P/E) tell investors about the company?

TrueCar (TRUE stock)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Software Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

TrueCar is currently trading at a P/E of 5.69. The P/E for the Software industry is 31.01 and the P/E for the S&P 500 is 29.59.

What is the current Price-to-Sales Ratio (P/S) for TrueCar?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

TrueCar is currently trading at a P/S of 1.35. The P/S for the Software industry is 8.11 and the P/S for the S&P 500 is 3.21.

How does TrueCar Price-to-BookRatio (P/B) compare to the Software industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

TrueCar P/B ratio is 0.92. The P/B for the Software industry is 6.23 and the P/B for the S&P 500 is 4.84.

How attractive is TrueCar Return on Invested Capital (ROIC) to investors?

TrueCar (TRUE)_ Return on Invested Capital in Comparison to the Software Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

TrueCar ROIC is currently -8.34% in comparison to 24.05% for the Software industry and 8.60% for the S&P 500.

What is TrueCar YTD Performance in comparison to its industry and the total market?

The year-to-date (YTD) performance is the amount of profit/loss realized by a stock since the first trading day of the current calendar year. 

The YTD performance for TrueCar is -18.57%. The Software industry has a YTD performance of -6.75% in comparison to the YTD S&P 500 performance of 25.06%.

TrueCar (TRUE)_ YTD Performance in Comparison to the Software Industry and the S&P 500 (1)

Recent Financial Results

  • Revenue reported of $55M, down 28.8% YoY and 16.4% sequentially (attributed to due primarily to limited new vehicle inventories due to the ongoing automobile semiconductor shortage)
  • Net loss of $6.8M, as compared to net income of $11.6M in Q3 2020, and net loss of $7.3M in the second quarter of 2021
  • Adjusted EBITDA of $1.5M as compared to $20.5M in the third quarter of 2020 and $4.7M in Q2 2021
  • Cash and equivalents of approximately $250.7M as of September 2021 and zero debt

Stock Price Target: $7.21

Company Overview

TRUE Stock Rating

TrueCar operates as an internet-based information, technology, and communication services company in the US. It operates its platform on the TrueCar website and mobile applications. The platform allows users to obtain market-based pricing data on new and used cars, and to connect with its network of certified dealers.

The company also provides forecast and consulting services regarding residual value of an automobile at given future points in time. This information is used to underwrite car loans / leases, and by financial institutions to measure exposure and risk across portfolios.

The company operates TrueCar Trade, which gives consumers information on the value of their trade-in vehicles; DealerSync, a dealer website creation and management service and a software platform that assists dealers in managing, marketing, and growing their business; and DealerScience, a platform that provides dealers with advanced digital retail software tools.

TrueCar also operates a platform for financial institutions, membership-based organizations and large enterprises. The company was incorporated in 2005 and is headquartered in Santa Monica, California. The current CEO is Michael Darrow.

Be sure to add TrueCar (TRUE) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.