Critical Comparison: TrueCar (NASDAQ:TRUE) vs. Zillow Group (NASDAQ:ZG)

Zillow Group (NASDAQ:ZG) and TrueCar (NASDAQ:TRUE) are both communication services companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, earnings, valuation, institutional ownership, analyst recommendations, dividends and profitability.

Volatility & Risk

Zillow Group has a beta of 1.95, suggesting that its share price is 95% more volatile than the S&P 500. Comparatively, TrueCar has a beta of 2.22, suggesting that its share price is 122% more volatile than the S&P 500.

Profitability

This table compares Zillow Group and TrueCar’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Zillow Group	1.96%	2.32%	1.97%
TrueCar	-10.27%	-23.76%	-18.02%

Analyst Recommendations

This is a summary of current ratings and recommmendations for Zillow Group and TrueCar, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Zillow Group	1	13	11	0	2.40
TrueCar	1	4	0	0	1.80

Zillow Group currently has a consensus target price of $52.29, indicating a potential upside of 48.71%. TrueCar has a consensus target price of $2.55, indicating a potential upside of 0.39%. Given Zillow Group’s stronger consensus rating and higher possible upside, equities analysts clearly believe Zillow Group is more favorable than TrueCar.

Earnings & Valuation

This table compares Zillow Group and TrueCar”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Zillow Group	$2.58 billion	3.11	$23.00 million	$0.22	159.82
TrueCar	$181.22 million	1.25	-$31.05 million	($0.22)	-11.55

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

Insider and Institutional Ownership

20.3% of Zillow Group shares are owned by institutional investors. Comparatively, 79.4% of TrueCar shares are owned by institutional investors. 29.9% of Zillow Group shares are owned by insiders. Comparatively, 3.9% of TrueCar shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

Zillow Group beats TrueCar on 12 of the 14 factors compared between the two stocks.

About Zillow Group

Zillow Group, Inc. operates real estate brands in mobile applications and Websites in the United States. The company offers premier agent and rentals marketplaces, new construction marketplaces, advertising, display advertising, and business technology solutions, as well as dotloop and floor plans. It also provides mortgage originations and the sale of mortgages, and advertising to mortgage lenders and other mortgage professionals; and title and escrow services. In addition, the company's brand portfolio includes Zillow Premier Agent, Zillow Home Loans, Zillow Rentals, Trulia, StreetEasy, HotPads, and Out East; and a suite of marketing software and technology solutions for the real estate industry, including ShowingTime+, Spruce, and Follow Up Boss. Zillow Group, Inc. was incorporated in 2004 and is headquartered in Seattle, Washington.

About TrueCar

TrueCar, Inc. operates as an internet-based information, technology, and communication services company in the United States. It operates its platform on the TrueCar website and mobile applications. Its platform enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar certified dealers. The company also offers forecast and consulting services regarding determination of the residual value of an automobile at given future points in time, which are used to underwrite automotive loans and leases, and by financial institutions to measure exposure and risk across loan, lease, and fleet portfolios. In addition, it provides TrueCar Trade, which gives consumers information on the value of their trade-in vehicles and enables them to obtain a guaranteed trade-in price before setting foot in the dealership; and DealerScience that provides dealers with advanced digital retailing software tools. The company was formerly known as Zag.com Inc. The company was incorporated in 2005 and is headquartered in Santa Monica, California.