What happened
Shareholders of automotive marketplace platform Cars.com (CARS 1.67%) had a good month in November. The stock surged 28.1% for the month, according to data provided by S&P Global Market Intelligence. And it hasn't stopped there. The stock has gained another 12.5% so far in December.
So what
There were multiple reasons for the recent surge in the shares. In early November, the company reported its third-quarter earnings. It showed further revenue growth, and it also continued to reduce its outstanding debt load. Cars.com also closed its acquisition of automotive fintech platform CreditIQ on Nov. 9, and it was announced that the stock would be joining the S&P SmallCap 600 index.
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Now what
In the third quarter, the company said revenue grew 8% versus the year-ago period. Management also guided investors to expect revenue in the fourth quarter to continue to increase slightly above third-quarter results. Free cash flow has jumped 17% in the first nine months of 2021, compared with the prior-year period. That has helped spur the company to reduce its debt. In the first nine months of 2021, the company has prepaid an additional $100 million to reduce its total debt outstanding to $490 million as of Sept. 30, 2021.
Investors also were informed of plans for the acquisition of CreditIQ at the time of the earnings release. The fintech platform will allow Cars.com to enter the auto finance market, and the company says the hundreds of million of visits to its online site "will power CreditIQ's auto finance technology and create a new, lender-based revenue source."
After the end of the month, Cars.com was also added to the S&P 600 SmallCap index. That helps explain the additional gains shareholders have seen into December. The move occurred on Dec. 2, so some mutual and exchange-traded index funds needed to buy the shares. All told, it was a busy and profitable month for Cars.com shareholders, bringing year-to-date gains to more than 65%.
