Financial Review: Reddit (NYSE:RDDT) versus CarGurus (NASDAQ:CARG)

CarGurus (NASDAQ:CARG) and Reddit (NYSE:RDDT) are both communication services companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, institutional ownership, risk, valuation, profitability, dividends and earnings.

Risk & Volatility

CarGurus has a beta of 1.22, suggesting that its stock price is 22% more volatile than the S&P 500. Comparatively, Reddit has a beta of 2.05, suggesting that its stock price is 105% more volatile than the S&P 500.

Profitability

This table compares CarGurus and Reddit’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CarGurus	18.06%	62.88%	32.82%
Reddit	31.35%	29.02%	26.32%

Institutional & Insider Ownership

86.9% of CarGurus shares are owned by institutional investors. 18.2% of CarGurus shares are owned by company insiders. Comparatively, 28.5% of Reddit shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations and price targets for CarGurus and Reddit, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CarGurus	0	7	7	1	2.60
Reddit	0	10	17	2	2.72

CarGurus presently has a consensus price target of $39.95, indicating a potential upside of 38.86%. Reddit has a consensus price target of $219.29, indicating a potential upside of 43.54%. Given Reddit’s stronger consensus rating and higher possible upside, analysts clearly believe Reddit is more favorable than CarGurus.

Earnings and Valuation

This table compares CarGurus and Reddit”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CarGurus	$906.98 million	2.83	$155.90 million	$1.84	15.64
Reddit	$2.20 billion	13.35	$529.72 million	$4.30	35.53

Reddit has higher revenue and earnings than CarGurus. CarGurus is trading at a lower price-to-earnings ratio than Reddit, indicating that it is currently the more affordable of the two stocks.

Summary

Reddit beats CarGurus on 12 of the 15 factors compared between the two stocks.

About CarGurus

CarGurus, Inc. operates an online automotive platform for buying and selling vehicles in the United States and internationally. It operates through two segments, U.S. Marketplace and Digital Wholesale. The company provides an online automotive marketplace where customers can search for new and used car listings from its dealers and sell their car to dealers and other consumers; and paid listings subscriptions for enhanced access to its marketplace that connects dealers to a large audience of informed and engaged consumers. It also offers dealer and non-dealer advertising products for its websites and social media platforms. The company operates online marketplaces under the CarGurus brand in the United States, Canada, and the United Kingdom; Autolist and CarOffer brands in the United States; and PistonHeads brand in the United Kingdom. The company was formerly known as CarGurus LLC and changed its name to CarGurus, Inc. in June 2015. CarGurus, Inc. was founded in 2005 and is headquartered in Cambridge, Massachusetts.

About Reddit

Reddit, Inc. operates a website that organizes digital communities. It organizes communities based on specific interests that enable users to engage in conversations by sharing experiences, submitting links, uploading images and videos, and replying to one another. The company was founded in 2005 and is headquartered in San Francisco, California.