What happened

Shares of Cars.com (CARS 1.53%) were moving higher today after the online auto retailer posted better-than-expected results in its fourth quarter.

As of 12:17 p.m. ET, the stock was up 10.7%.

So what

Revenue in the quarter rose 6% to $168.2 million, which topped estimates at $166.2 million. That top-line growth was driven by a 5% increase in monthly unique visitors to 24.6 million, while traffic, or total visits, was also up 5% to 24.6 million. Monthly average revenue per dealer increased by 1% to $2,361.

On the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose from $46.8 million to $49.5 million, and the company posted a per-share profit of $0.15 based on generally accepted accounting principles (GAAP), compared to a per-share loss of $0.04 in the quarter a year ago and estimates at a $0.06 per-share profit. The bottom line benefited as the company slashed expenses in categories like general and administrative costs. 

CEO Alex Vetter said: "2022 marked a strong year of growth for our business as we helped consumers, dealers, [original equipment manufacturers], and lenders in an environment that challenged many. We made strategic operating investments to further expand the range of customer capabilities on our platform with the integration of CreditIQ and Accu-Trade."

Now what

Looking ahead, Cars.com expects revenue of $166 million to $168 million, representing growth of 5% to 6% as the company anticipates a continued pullback by digital dealers, and it also expects lower advertising spend.

That forecast was within the analyst consensus at $167.5 million, and the company said adjusted EBITDA margins would improve over the course of the year, forecasting 25% to 27% EBITDA margins in the first quarter. 

Citing mixed signals in the automotive supply chain, Cars.com guided for 3% to 6% full-year revenue growth due to the expectation that lower inventory levels will persist. That guidance is also in line with the consensus at $688 million, and the company expects to exit the year with adjusted EBITDA margins approaching 30%.

Investors seemed to cheer the bottom line improvements as that forecast means the stock trades just 6 times this year's expected EBITDA. There could be considerable upside to the stock once inventory levels improve.