4 Graphs Investors Need to See From TrueCar's First Quarter

By Daniel Miller Markets Fool.com

All eyes are on TrueCar (NASDAQ: TRUE) during 2017 to see if the company can log its strongest full calendar year on the books. TrueCar was still getting its legs under it as a public company in 2014. 2015 was spent in disaster control mode after the company's dealership relations crumbled, adjusted-EBITDA imploded, and executives left in droves. 2016 was a new era that brought significant improvements during the back half of the year -- but if the first-quarter of 2017 is any indication, this will be the company's strongest year on record. Nothing can show this story better than the following four graphs.

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Growth has returned

Investors understand that younger companies, often considered growth stocks, generally post eye-popping year-over-year growth figures. That blistering growth can't last forever, but one of the biggest bear arguments against TrueCar during 2015 was the complete erosion of growth in units/transactions. That bottomed out last year during the second quarter and growth has jumped higher in each following quarter.

Data source: TrueCar SEC filings. Chart by author.

Expect its year-over-year growth to continue next quarter as the company enters into the automotive industry's strongest season of the year. Better yet, not only has TrueCar's unit growth returned, it's also cut its acquisition cost per unit down 13% year over year to $153; and its monetization per unit remains at a healthy $324.

Image source: Getty Images.

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Unique visits climb

TrueCar's average monthly unique visitors jumped 10% to 7.3 million during the first quarter. That's great news for investors simply because it signals that more consumers are entering into the company's business model funnel, which sets the stage for more transactions this year.

Data source: TrueCar SEC filings. Chart by author.

In addition to unique visits, another factor to consider is what segment the units are generated in. For instance, USAA is by far TrueCar's most valuable affinity partnership -- which essentially means TrueCar powers USAA's branded car information/purchase service. USAA generated 65,665 of TrueCar's total 217,656 units and grew 18% during the first quarter compared to the prior year. But what's important is that TrueCar's own brand posted 27% growth to 91,729 units, and its "other partners" group, which includes AARP, American Express, Sam's Club, and AAA, among others, generated 29% growth to 60,262 units.

USAA is a cornerstone for TrueCar's business, but investors should be happy that its other segments are growing faster, since that lessens its dependence on USAA transactions for financial success.

Speaking of financial success, not only did TrueCar's net loss shrink -- down from a loss of $11.7 million to a loss of $6.8 million -- but its adjusted-EBITDA also posted a third consecutive excellent result.

Data source: TrueCar SEC filings. Chart by author.

Something to watch

The next graph illustrates TrueCar's ongoing effort to find equilibrium between the total number of dealerships within its network and the amount of value generated through each.

Data source: TrueCar's SEC filings. Chart by author.

On one hand, TrueCar is more valuable to its dealers if more users are funneled through fewer dealerships, thus improving revenue and transactions generated at each. However, that offers consumers less value as they might have to travel further to a dealership within TrueCar's network. In my humble opinion, it won't be a bad development if the number of dealerships plateaus over the next year or so, which would help dealers generate more sales and strengthen the partnership between the network and TrueCar.

The road ahead

"Because our core business is healthy again, we are ready to pursue a bigger and broader strategy," said Chip Perry, TrueCar's president and CEO, in a press release. "In addition to our market-leading Inventory and Pricing Solution, we are moving upstream into the Research and Discovery phase of the car buying journey, as well as downstream into the Transaction phase."

It's an exciting time for TrueCar investors now that its companywide turnaround is in full swing. With the horrors of 2015 now securely in the rearview mirror, looking toward potential services and revenue from trade-in transactions could take the company to another level. Until then, it's clear the company still has plenty of growth ahead.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool recommends TrueCar. The Motley Fool has a disclosure policy.