TRUE?

I have been looking at RB recommendation True Car (TRUE).
Assuming you know about the company - if not, here is IR page
http://ir.true.com/index.cfm

Concept seems quite useful for car buys as well as dealers. Offering Zillow / Trulia type information for cars while charging dealers only on actual transaction seems like win-win model.

Valuing per Saul’s method of growth in adjusted earnings, here is how my spreadsheet looks like

Adjusted EBITDA in $M
last 4q previous 4q
Jan-March 2015 4.3 Jan-March 2014 1
Oct-Dec 2014 4.3 Oct-Dec 2013 -0.3
Jul-Sept 2014 3.9 Jul-Sept 2013 2
April-June 2014 1.8 April-June 2013 2.6
Total 14.3 Total 5.3

Annual Growth rate 170%
Market cap 1160
P/adjusted adj EBITDA 81.11888112 P/AEG 0.477700078
or if target P/AEG is 1, the stock has upside to 100%+ from here.

Company guidance for Q2 adjusted EBITDA IS >$5.4M and for 2015 is >$26.6M later of which translates to growth rate of 140% over 2014 adj EBITDA of $11M. At $26.6M Adj EBITDA, P/Adj EBITDA is 43.6 which compares to growth rate of 140%…

2 people management - CEO and president - bought some 20K shares in open market this month… overall Morningstar shows 4%+ shares owned buy insiders…

On the Negative side

  1. CA dealer association filed a lawsuit recently… doesnt look much impactful, but jury is out on this.
  2. Hudaman has opinion on TRUE’s board saying this is fairly valued and probbaly doesnt have much upside because the market share is at 4% and cant go much higher… I respect Hudaman’s opinion but seems like this is too simplistic view.

This looks to me true rule breaker… large market ahead and good potential disrupt existing ways of doing business.

I have small position… looking for opinions for or against this stock.

Nilvest.

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Sorry, I don’t post much, so didn’t realize the spreadsheet wouldn’t post well.

Also, I admit that I haven’t studied the company or management to good extent… Sales lead generation for cars is very competitive business with many entrenched players… Yet, this one looks very interesting and is growing rapidly.

On the Negative side
1. CA dealer association filed a lawsuit recently… doesnt look much impactful, but jury is out on this.

Just read about that this morning. I actually view that as a positive. It means the dealers are seriously worried about them.

http://www.latimes.com/business/autos/la-fi-hy-car-dealers-s…

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“I actually view that as a positive. It means the dealers are seriously worried about them”

I agree… we have seen this happening with Tesla as well.
But it seems that stock price reacted to this news… which is why I wanted to keep in sight… (thinking there could be something else thats not visible on the surface)

I dis look at the website as if I want to buy a car and I am quite impressed with the interface… i could narrow down to choice of car quickly, saw a couple of options and found VIN and CARFAX data for car in the sale, and ofcourse a “no haggle price” with clarity on its market value.
This is very neat compared to other site’s experiences…

Another point I noticed while researching further is their revenue per dealer has been climbing up steadily while number of dealers growing as well… so growth should be accelerating in near future

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Hi Nilvest, TrueCar looked interesting to me. I read the earnings report and all 82 post on the TRUE board. I thought the dealers lawsuit by 170 dealers was nonsense and unlikely to win when there are already 10,000 dealers working with True. Looked like considerable networking effect, although there are other companies doing roughly the same thing. However the price has dropped from $18 and change when it was recommended in Jan to $14 plus today because of two successive disappointing earnings reports.

The problem for me is that they can’t even get to positive adjusted earnings . They’ve had adjusted earnings of 0.0 cents for the last three quarters (improving from losses of a few cents each).

And revenue sequentially is hardly budging. It’s been 56.8, 55.5, 58.6. That means revenue is up 1.8 or 3% in six months. That’s not exactly hitting it out of the ballpark as you’d expect to see.

Adjusted EBITDA has been 3.9, 4.3, 4.3. Not heroic either.

If they do break through and make (let’s say) 3, 4 and 5 cents the last three quarters of the year they’ll finish with 12 cents and a PE of over 100. I think I can wait and see what happens in the next few quarters. There doesn’t seem to be any hurry and the stock isn’t going to run away. If I buy it up a couple of dollars because a great earnings report makes it clear that the company is winning out, it will be worth the wait.

Saul

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Thanks Saul… excellent points.