The stock price of Carvana (NYSE:CVNA), a platform to buy and sell used cars, has experienced a significant surge of 32% in the past five days. A substantial portion of this increase occurred after a well-known Wall Street research firm revised its outlook and price target for CVNA stock upward. Separately, does its valuation make its stock attractive? See What’s Happening With GameStop Stock?
However, we think that CVNA stock looks unattractive – to buy at its current price of around $220. We believe there are a couple of concerns with CVNA stock, which makes it unattractive given that its current valuation looks high.
We arrive at our conclusion by comparing the current valuation of CVNA stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Carvana along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a moderate operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Carvana’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, CVNA stock looks expensive compared to the broader market.
• Carvana has a price-to-sales (P/S) ratio of 2.2 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 30.7 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 33.1 vs. the benchmark’s 24.3
How Have Carvana’s Revenues Grown Over Recent Years?
Carvana’s Revenues have seen notable growth over recent years.
• Carvana has seen its top line grow at an average rate of 4.1% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 26.9% from $11 Bil to $14 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 46.3% to $3.5 Bil in the most recent quarter from $2.4 Bil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is Carvana?
Carvana’s profit margins are lower than most companies in the Trefis coverage universe.
• Carvana’s Operating Income over the last four quarters was $990 Mil, which represents a poor Operating Margin of 7.2% (vs. 13.0% for S&P 500)
• Carvana’s Operating Cash Flow (OCF) over this period was $918 Mil, pointing to a poor OCF-to-Sales Ratio of 6.7% (vs. 15.7% for S&P 500)
Does Carvana Look Financially Stable?
Carvana’s balance sheet looks strong.
• Carvana’s Debt figure was $6.0 Bil at the end of the most recent quarter, while its market capitalization is $29 Bil (as of 3/25/2025). This implies a strong Debt-to-Equity Ratio of 19.9% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $2.2 Bil of the $8.5 Bil in Total Assets for Carvana. This yields a strong Cash-to-Assets Ratio of 25.7% (vs. 14.8% for S&P 500)
How Resilient Is CVNA Stock During A Downturn?
CVNA stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• CVNA stock fell 98.4% from a high of $239.63 on 3 January 2022 to $3.72 on 27 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 31 October 2024
• Since then, the stock has increased to a high of $285.33 on 17 February 2025 and currently trades at around $220
Covid Pandemic (2020)
• CVNA stock fell 73.3% from a high of $110.09 on 23 February 2020 to $29.35 on 22 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 5 June 2020
Putting All The Pieces Together: What It Means For CVNA Stock
In summary, Carvana’s performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Very Weak
• Financial Stability: Very Strong
• Downturn Resilience: Very Weak
• Overall: Neutral
In conclusion, although Carvana’s performance across the examined metrics appears neutral, when factoring in its high valuation, we believe the stock is unattractive to buy at its current price of $220.
While you would do well to avoid CVNA stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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