$5.30
$33.80
bear $5.30
base $21.60
bull $33.80
margin of safety $13.00
market price* $30.28
CarGurus runs online car-shopping marketplaces in the United States, United Kingdom and Canada. Car dealers pay subscriptions and advertising fees for access to consumers who search the sites. In 2025 revenue was $907.0 million, up 14%, and income from continuing operations was $244.4 million on 93% gross margins. In the third quarter of 2025 the company began winding down CarOffer, its wholesale car-trading business, and completed the wind-down by December 31, 2025. CarOffer is now reported as discontinued operations, with losses of $40.8 million in 2025, $107.8 million in 2024 and $70.4 million in 2023, including impairments of $144.4 million in 2024 and $32.6 million in 2025. Those write-offs are a record of capital that was spent on acquisitions and did not pay off, and they weigh on the bear case. The company has no long-term debt. How we measured earnings. We start with cash from operations and remove working-capital swings, stock compensation (a real cost, $50.4 million in 2025) and the part of capital spending needed just to keep the business running (about $25.6 million in 2025, mostly capitalized website development). We treat the commissions the company capitalizes each year ($19.2 million in 2025) as an ongoing cost rather than a working-capital swing. Reported 2025 owner earnings on this basis were $216.7 million, or $2.16 per share, but that figure is flattered by a $25.9 million deferred-tax benefit. The 2025 tax law change had a material effect on 2025 cash taxes, and the filing says it will also affect 2026. Cash taxes paid were $19.8 million in 2025 against $40.8 million in 2024 and $74.8 million in 2023. We do not treat that timing benefit as permanent, so our starting level is $190.8 million, or about $1.97 per share on roughly 96.8 million diluted shares (the fourth-quarter 2025 count, after $351.9 million of share repurchases in 2025). We use only 2025 as the starting point. The 2023 and 2024 results include CarOffer, a business that no longer exists, and heavy headquarters build-out spending ($75.2 million of property purchases in 2024). Earlier years are a different, smaller business. Growth. Owner earnings per share rose from $0.64 in 2024 to $2.16 in 2025, but 2024 was depressed by the headquarters spending and CarOffer, so that jump is not a run rate. Our base case assumes only 3% a year for five years, below the trailing rate. What supports it: paying dealers grew from 30,935 to 32,010 to 34,409 over 2023 to 2025, and revenue per dealer in the fourth quarter rose from $5,503 to $6,144 to $6,616. The company attributes this to signing new dealers at market rates, subscription tier upgrades, add-on products and like-for-like price increases for existing dealers. We did not credit share gains, further margin expansion (operating margin went from 17% to 27% of revenue over 2023 to 2025), international expansion, new products or buybacks. Base case, about $21.60 per share: $1.97 of owner earnings growing 3% a year for five years, then held flat through year 15, and nothing after that because we cannot point to evidence beyond that horizon. Bear case, about $5.30 per share: the company's own risk disclosures say search-engine ranking changes or search engines' competing products could reduce traffic and leads to dealers. In this case dealer revenue per dealer falls back to the level of late 2023, about 17% below the fourth quarter of 2025. With $841.5 million of gross profit and marketing spending of 38% of revenue, most of the lost revenue drops through, and owner earnings fall to roughly $80 million (about $0.83 per share). They then shrink 3% a year for ten years, after which we assume nothing. Bull case, about $33.80 per share: the pricing and dealer-count trends of the last two years continue, with 7% annual growth for five years, then flat through year 25. The shares appear to be worth roughly $21.60 in our base case, with a range of $5.30 to $33.80. We do not add the company's cash separately because our earnings figure already includes the interest it earns. What would make this wrong: a sustained loss of search traffic, dealers cutting subscriptions, or 2025's cash flow proving flatter than we assume. We could not separate CarOffer's cash flows from the consolidated 2021 to 2025 figures, so the starting level rests on the 2025 consolidated cash flow with only the tax timing benefit removed. Cross-checking from continuing operating income gave a similar answer of about $1.9 per share.