CarGurus (CARG)

Short-term

Turnover ratios

CarGurus Inc's inventory turnover has shown a significant increase over the past few quarters, indicating that the company is efficiently managing its inventory levels. The ratio reached a peak in Q4 2023 at 793.92, signifying that inventory was turned over almost 794 times during that quarter. This trend suggests that CarGurus is effectively selling its inventory and reducing the risk of obsolete or excess stock.

In terms of receivables turnover, CarGurus has shown consistent fluctuations in this ratio over the periods analyzed. A downward trend is observed from Q4 2022 to Q3 2023 before an uptick in Q2 and Q3 2023. The ratio indicates the speed at which CarGurus collects its accounts receivable, with higher numbers representing a faster collection process.

The payables turnover ratio for CarGurus demonstrates a decreasing trend, indicating that the company is taking longer to pay its suppliers. This can have both positive and negative implications, as delayed payments may strain supplier relationships while also providing CarGurus with more liquidity to invest in other areas of the business.

CarGurus' working capital turnover ratio has been relatively stable over the periods analyzed, hovering around 3 to 4. This ratio reflects how efficiently the company is deploying its working capital to generate sales revenue. A higher working capital turnover ratio suggests that CarGurus is effectively utilizing its resources to drive sales and support business operations.

Overall, the analysis of CarGurus Inc's activity ratios signals a mixed performance in terms of inventory management, accounts receivable collection, payables management, and working capital efficiency. It is important for the company to monitor these ratios closely and make strategic adjustments to optimize its operational effectiveness and financial performance.

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Average number of days

CarGurus Inc's activity ratios show significant fluctuations over the quarters, indicating changes in its operational efficiency and effectiveness in managing its inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH):
- CarGurus has shown a consistent improvement in managing its inventory over the quarters.
- The company reduced its DOH from 10.21 days in Q3 2022 to 0.46 days in Q4 2023, reflecting a more efficient inventory turnover.
- This significant improvement suggests that CarGurus has optimized its inventory management practices, resulting in quicker turnover and reduced holding costs.

2. Days of Sales Outstanding (DSO):
- The DSO ratio for CarGurus has been volatile, with fluctuations across quarters.
- The company had a relatively high DSO of 46.94 days in Q2 2022, which improved to 10.63 days in Q1 2023.
- The reduction in DSO indicates that CarGurus has been successful in collecting its receivables more promptly, potentially improving cash flow and liquidity.

3. Number of Days of Payables:
- CarGurus has shown varying trends in the number of days of payables over the quarters.
- The company had increasing days of payables from Q1 2022 to Q4 2022, followed by a decrease in Q1 2023.
- The longer payment terms taken by CarGurus may indicate a favorable position in managing its working capital, although extended payables could strain relationships with suppliers if not managed carefully.

In conclusion, CarGurus Inc's activity ratios demonstrate improvements in inventory management and receivables collection efficiency, while the management of payables has shown some variability. These changes suggest that CarGurus has been implementing strategies to enhance its operational performance and strengthen its financial position over the quarters.

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Long-term

Long-term activity ratios provide insights into how efficiently a company is utilizing its assets to generate sales. In the case of CarGurus Inc, we will focus on two key ratios: Fixed Asset Turnover and Total Asset Turnover.

1. Fixed Asset Turnover:
- The Fixed Asset Turnover ratio measures how effectively the company is using its fixed assets to generate revenue.
- CarGurus Inc's Fixed Asset Turnover ratio has been consistently high over the quarters, ranging from 10.97 in Q4 2023 to 36.57 in Q1 2022.
- A high Fixed Asset Turnover ratio indicates that CarGurus Inc is efficiently utilizing its fixed assets to generate sales.
- The increasing trend in the Fixed Asset Turnover ratio over the quarters suggests that the company is becoming more efficient in utilizing its fixed assets to drive revenue.

2. Total Asset Turnover:
- The Total Asset Turnover ratio reflects how well the company is using all its assets to generate sales.
- CarGurus Inc's Total Asset Turnover ratio has fluctuated over the quarters, from 0.99 in Q4 2023 to 1.79 in Q4 2022.
- A higher Total Asset Turnover ratio indicates that the company is efficiently using its total assets to generate revenue.
- The fluctuating trend in the Total Asset Turnover ratio suggests that CarGurus Inc's efficiency in utilizing all its assets to drive sales has varied over the quarters.

In conclusion, CarGurus Inc has shown strong efficiency in utilizing its fixed assets to generate sales, as indicated by the consistently high Fixed Asset Turnover ratios. However, there is some variability in the efficiency of utilizing total assets, as reflected by the fluctuating Total Asset Turnover ratios. Overall, the company's ability to generate sales from its assets has shown improvement over the quarters, particularly in terms of fixed asset utilization.