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Financial Analysis of TrueCar, Inc.

1. Financial Ratio and Metric Analysis:

Profitability:

• Gross Profit Margin:
  • Ratio/Metric: Gross Profit = Revenue – Cost of Revenue = $175,598 – $26,388 = $149,210. Gross Profit Margin = $149,210 / $175,598 = 85.0%
  • Trend: Previous year Gross Profit = $158,706 – $15,856 = $142,850. Gross Profit Margin = $142,850 / $158,706 = 89.9%. Percentage Change = ((85.0% – 89.9%) / 89.9%) * 100 = -5.45%
  • Industry: The automotive marketplace industry typically has lower gross profit margins than software or service-based industries. A gross profit margin of 85.0% is relatively high, suggesting strong pricing power or efficient cost management compared to some competitors, but the decrease of 5.45% indicates a negative trend.
• Operating Profit Margin:
  • Ratio/Metric: Loss from Operations = $(37,180). Operating Profit Margin = $(37,180) / $175,598 = -21.2%
  • Trend: Previous year Loss from Operations = $(56,467). Operating Profit Margin = $(56,467) / $158,706 = -35.6%. Percentage Change = ((-21.2% – (-35.6%)) / (-35.6%)) * 100 = -40.45%
  • Industry: A negative operating profit margin is not ideal, but the increase from -35.6% to -21.2% indicates improvement in operational efficiency.
• Net Profit Margin:
  • Ratio/Metric: Net Loss = $(31,048). Net Profit Margin = $(31,048) / $175,598 = -17.7%
  • Trend: Previous year Net Loss = $(49,766). Net Profit Margin = $(49,766) / $158,706 = -31.3%. Percentage Change = ((-17.7% – (-31.3%)) / (-31.3%)) * 100 = -43.45%
  • Industry: Similar to the operating profit margin, a negative net profit margin is not ideal, but the increase from -31.3% to -17.7% indicates improvement in overall profitability.
• Return on Assets (ROA):
  • Ratio/Metric: ROA = Net Loss / Total Assets = $(31,048) / $159,691 = -19.4%
  • Industry: A negative ROA indicates the company is not efficiently using its assets to generate profit.
• Return on Equity (ROE):
  • Ratio/Metric: ROE = Net Loss / Total Stockholders’ Equity = $(31,048) / $118,137 = -26.3%
  • Industry: A negative ROE indicates the company is not generating profit from shareholders’ investments.
• Earnings Per Share (EPS) – Basic and Diluted:
  • Ratio/Metric: EPS = Net Loss / Weighted Average Shares Outstanding = $(31,048) / 90,159 = $(0.34)
  • Trend: Previous year EPS = $(49,766) / 89,766 = $(0.55). Percentage Change = ((-0.34 – (-0.55)) / (-0.55)) * 100 = -38.18%
  • Industry: A negative EPS indicates the company is not profitable on a per-share basis, but the increase from $(0.55) to $(0.34) indicates improvement.

Liquidity:

• Current Ratio:
  • Ratio/Metric: Current Ratio = Total Current Assets / Total Current Liabilities = $135,128 / $32,893 = 4.11
  • Trend: Previous year Current Ratio = $163,082 / $28,978 = 5.63. Percentage Change = ((4.11 – 5.63) / 5.63) * 100 = -26.99%
  • Industry: A current ratio of 4.11 is generally considered healthy, indicating the company has sufficient liquid assets to cover its short-term liabilities.
• Quick Ratio (Acid-Test Ratio):
  • Ratio/Metric: Quick Assets = Total Current Assets – Inventory. Since inventory is not listed, we will assume other current assets are not easily liquidated. Quick Ratio = ($135,128 – $0) / $32,893 = 4.11
  • Trend: Previous year Quick Ratio = ($163,082 – $0) / $28,978 = 5.63. Percentage Change = ((4.11 – 5.63) / 5.63) * 100 = -26.99%
  • Industry: A quick ratio of 4.11 is generally considered healthy, indicating the company has sufficient liquid assets to cover its short-term liabilities.
• Cash Ratio:
  • Ratio/Metric: Cash Ratio = (Cash and Cash Equivalents) / Total Current Liabilities = $111,835 / $32,893 = 3.40
  • Trend: Previous year Cash Ratio = $136,964 / $28,978 = 4.73. Percentage Change = ((3.40 – 4.73) / 4.73) * 100 = -28.12%
  • Industry: A cash ratio of 3.40 indicates the company has a strong ability to cover its short-term liabilities with its cash and cash equivalents.

Solvency/Leverage:

• Debt-to-Equity Ratio:
  • Ratio/Metric: Total Liabilities / Total Stockholders’ Equity = $41,554 / $118,137 = 0.35
  • Trend: Previous year Debt-to-Equity Ratio = $44,105 / $160,215 = 0.28. Percentage Change = ((0.35 – 0.28) / 0.28) * 100 = 25%
  • Industry: A debt-to-equity ratio of 0.35 is relatively low, indicating the company relies more on equity than debt to finance its assets.
• Debt-to-Assets Ratio:
  • Ratio/Metric: Total Liabilities / Total Assets = $41,554 / $159,691 = 0.26
  • Trend: Previous year Debt-to-Assets Ratio = $44,105 / $204,320 = 0.22. Percentage Change = ((0.26 – 0.22) / 0.22) * 100 = 18.18%
  • Industry: A debt-to-assets ratio of 0.26 indicates a relatively low proportion of assets are financed by debt.
• Interest Coverage Ratio (Times Interest Earned):
  • Ratio/Metric: Earnings Before Interest and Taxes (EBIT) / Interest Expense. EBIT = Loss from Operations + Interest Income = $(37,180) + $6,147 = $(31,033). Interest Expense is not explicitly listed, so we will assume it is negligible.
  • Industry: Since EBIT is negative, the interest coverage ratio is negative, indicating the company is not generating enough earnings to cover its interest expenses.

Activity/Efficiency:

• Inventory Turnover:
  • Ratio/Metric: Not applicable as inventory is not listed.
• Days Sales Outstanding (DSO):
  • Ratio/Metric: DSO = (Accounts Receivable / Revenue) * 365 = ($15,742 / $175,598) * 365 = 32.7 days
  • Trend: Previous year DSO = ($18,264 / $158,706) * 365 = 42.0 days. Percentage Change = ((32.7 – 42.0) / 42.0) * 100 = -22.14%
  • Industry: A DSO of 32.7 days indicates the company is collecting its receivables in a reasonable timeframe.
• Days Payable Outstanding (DPO):
  • Ratio/Metric: DPO = (Accounts Payable / Cost of Revenue) * 365 = ($7,928 / $26,388) * 365 = 109.7 days
  • Trend: Previous year DPO = ($6,875 / $15,856) * 365 = 158.4 days. Percentage Change = ((109.7 – 158.4) / 158.4) * 100 = -30.75%
  • Industry: A DPO of 109.7 days indicates the company is taking a relatively long time to pay its suppliers.
• Asset Turnover:
  • Ratio/Metric: Revenue / Total Assets = $175,598 / $159,691 = 1.10
  • Trend: Previous year Asset Turnover = $158,706 / $204,320 = 0.78. Percentage Change = ((1.10 – 0.78) / 0.78) * 100 = 41.03%
  • Industry: An asset turnover of 1.10 indicates the company is generating $1.10 in revenue for every dollar of assets.

Valuation:

• Price-to-Earnings Ratio (P/E):
  • Ratio/Metric: Market Cap = Shares Outstanding * Stock Price = 87,190,136 * $2.50 = $217,975,340. P/E Ratio = Market Cap / Net Loss = $217,975,340 / $(31,048) = -7.02
  • Industry: A negative P/E ratio is not meaningful as the company has a net loss.
• Price-to-Book Ratio (P/B):
  • Ratio/Metric: Market Cap / Total Stockholders’ Equity = $217,975,340 / $118,137 = 1.85
  • Industry: A P/B ratio of 1.85 suggests the market values the company at 1.85 times its book value.
• Price-to-Sales Ratio (P/S):
  • Ratio/Metric: Market Cap / Revenue = $217,975,340 / $175,598 = 1.24
  • Industry: A P/S ratio of 1.24 suggests the market values the company at 1.24 times its revenue.
• Enterprise Value to EBITDA (EV/EBITDA):
  • Ratio/Metric: Enterprise Value (EV) = Market Cap + Total Debt – Cash = $217,975,340 + $41,554 – $111,835 = $147,694,340. EBITDA = Net Loss + Interest + Taxes + Depreciation and Amortization = $(31,048) + $0 + $15 + $18,035 = $(13,098). EV/EBITDA = $147,694,340 / $(13,098) = -11,276.09
  • Industry: A negative EV/EBITDA ratio is not meaningful as the company has a negative EBITDA.

Growth Rates:

• Revenue Growth:
  • Ratio/Metric: (Current Revenue – Previous Revenue) / Previous Revenue = ($175,598 – $158,706) / $158,706 = 10.64%
  • Industry: A revenue growth of 10.64% indicates the company is growing its sales.
• Net Income Growth:
  • Ratio/Metric: (Current Net Income – Previous Net Income) / Previous Net Income = ((-$31,048) – (-$49,766)) / (-$49,766) = -37.61%
  • Industry: A net income growth of -37.61% indicates the company is improving its profitability.
• EPS Growth:
  • Ratio/Metric: (Current EPS – Previous EPS) / Previous EPS = ((-$0.34) – (-$0.55)) / (-$0.55) = -38.18%
  • Industry: An EPS growth of -38.18% indicates the company is improving its profitability on a per-share basis.

Other Relevant Metrics:

• Digital Motors Acquisition:
  • Analysis: TrueCar acquired Digital Motors for a total consideration of $21,786, consisting of $15,484 in cash and $6,302 in contingent consideration. The acquisition resulted in $26,819 of assets acquired, including $5,201 in cash, $12,500 in acquired technology, and $8,570 in goodwill. This suggests TrueCar is investing in technology to enhance its platform.

2. Commentary:

TrueCar’s financial performance in 2024 shows a mixed picture. While the company is still operating at a loss, profitability metrics like Operating Profit Margin and Net Profit Margin have improved significantly compared to the previous year. Revenue growth is positive, and the company maintains strong liquidity. However, negative ROA and ROE indicate inefficient asset utilization and shareholder return, and the negative P/E and EV/EBITDA ratios reflect the company’s current unprofitability.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️