I have recently been inspired by Chris Mayer’s book “100 Baggers” to find companies (aside from Apple) that look like they have most of what it takes to generate long term gains. Based on the book, I had a checklist and CarGurus checked a lot of those boxes. My research is in the attached slides but here is what I see: A founder-involved company, that is currently relatively small ($3b market cap). This is important because that means that they have room to grow. Are they growing? Yes, they are. Both revenue (domestic & international) and earnings have steadily increased and their management has demonstrated the ability to grow the business over the past few years (consistently high ROE & ROIC). The company has high gross margins and positive free cash flow, so if management continues to be efficient, the business will continue to grow. They believe and prove that their platform has a competitive advantage that allows them to connect car sellers to motivated car buyers more efficiently than anybody else. Finally, the stock is only up 15% since its IPO is late 2017, so it has not yet experienced an extended period of growth. The only thing that I didn’t like about this company is its high P/E ratio of 57x, but I figure if the price falls and nothing material changes with the business model, I wouldn’t be opposed to buying more. Time will tell if this one actually ever reaches the elite 100 bagger status, but that is why time is such a crucial asset in investing. Please check out the slides below with my research and please comment below with any thoughts.
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