Buy or Sell ACV Auctions Stock?
ACV Auctions (ACVA) stock has fallen 38% during the past day, and is currently trading at $5.09. We believe there is a near-equal mix of good and bad in ACVA stock given its overall Moderate operating performance and financial condition. This is aligned with the stock’s Moderate valuation because of which we think it is Fairly Priced.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Moderate |
| What you get: | |
| Growth | Very Strong |
| Profitability | Very Weak |
| Financial Stability | Very Strong |
| Downturn Resilience | Very Weak |
| Operating Performance | Moderate |
| Stock Opinion | Fairly Priced |
Is holding ACVA stock risky? Of course it is. High Quality Portfolio mitigates that risk.
Let’s get into details of each of the assessed factors but before that, for quick background: With $872 Mil in market cap, ACV Auctions provides a digital marketplace connecting buyers and sellers for wholesale vehicle auctions, along with data services offering insights into used vehicle condition and value.
[1] Valuation Looks Moderate
| ACVA | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 1.2 | 3.1 |
| Price-to-Earnings Ratio | -12.0 | 23.5 |
| Price-to-Free Cash Flow Ratio | 19.0 | 19.7 |
This table highlights how ACVA is valued vs broader market. For more details see: ACVA Valuation Ratios
[2] Growth Is Very Strong
- ACV Auctions has seen its top line grow at an average rate of 20.5% over the last 3 years
- Its revenues have grown 23% from $596 Mil to $735 Mil in the last 12 months
- Also, its quarterly revenues grew 16.5% to $200 Mil in the most recent quarter from $171 Mil a year ago.
| ACVA | S&P 500 | |
|---|---|---|
| 3-Year Average | 20.5% | 5.5% |
| Latest Twelve Months* | 23.4% | 6.0% |
| Most Recent Quarter (YoY)* | 16.5% | 7.1% |
This table highlights how ACVA is growing vs broader market. For more details see: ACVA Revenue Comparison
[3] Profitability Appears Very Weak
- ACVA last 12 month operating income was $-71 Mil representing operating margin of -9.7%
- With cash flow margin of 11.9%, it generated nearly $87 Mil in operating cash flow over this period
- For the same period, ACVA generated nearly $-73 Mil in net income, suggesting net margin of about -9.9%
| ACVA | S&P 500 | |
|---|---|---|
| Current Operating Margin | -9.7% | 18.8% |
| Current OCF Margin | 11.9% | 20.5% |
| Current Net Income Margin | -9.9% | 12.9% |
This table highlights how ACVA profitability vs broader market. For more details see: ACVA Operating Income Comparison
[4] Financial Stability Looks Very Strong
- ACVA Debt was $220 Mil at the end of the most recent quarter, while its current Market Cap is $872 Mil. This implies Debt-to-Equity Ratio of 25.3%
- ACVA Cash (including cash equivalents) makes up $316 Mil of $1.2 Bil in total Assets. This yields a Cash-to-Assets Ratio of 27.1%
| ACVA | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 25.3% | 21.3% |
| Current Cash-to-Assets Ratio | 27.1% | 7.0% |
[5] Downturn Resilience Is Very Weak
ACVA has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- ACVA stock fell 82.9% from a high of $37.04 on 16 April 2021 to $6.35 on 14 July 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $23.17 on 2 December 2024 , and currently trades at $5.09
| ACVA | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -82.9% | -25.4% |
| Time to Full Recovery | Not Fully Recovered | 464 days |
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ACVA Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.