Carvana’s 130% Run Is Impressive, But Is It Already Priced In?

If you’ve watched Carvana (NYSE: CVNA) over the past few years, the turnaround is startling. The stock sank below $5 in late 2022 amid bankruptcy fears, rebounded to about $260 in 2024, and has surged 130% in 2025 — recently trading near $468. That’s well ahead of the S&P 500’s 17% gain, while rival CarMax’s stock is down 50%.

The immediate catalyst is clear: Carvana will join the S&P 500 on December 22, 2025, a move that pulls in passive inflows and renews attention from institutional investors. But the rally isn’t driven by index mechanics alone. Carvana’s fundamentals have strengthened meaningfully, with higher unit sales, rising revenue, and better operational efficiency.

Still, momentum has pushed the stock to a valuation that assumes near-perfect execution. With a market capitalization of over $100 billion, CVNA appears stretched on fundamentals alone. See Buy of Fear Carvana Stock?

We discuss what’s driving the disconnect and what it means for investors below. That said, if you desire upward potential with less volatility than owning a single stock, consider the High Quality Portfolio. It has significantly outperformed its benchmark—a blend of the S&P 500, Russell 2000, and S&P MidCap indexes—and has yielded returns above 105% since its inception. What accounts for this? As a collective, HQ Portfolio stocks have delivered superior returns with reduced risk compared to the benchmark index, avoiding significant fluctuations, as illustrated in HQ Portfolio performance metrics. Additionally, check out What’s Next After Sofi Stock’s 117% Surge?

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Valuation: Carvana Is in the Stratosphere

Its price-to-sales ratio sits near 2.9x, only a touch below the index’s 3.2x, but the gap widens dramatically on earnings and cash flow. Carvana trades around 92 times earnings — more than triple the S&P 500’s 23 — and roughly 96 times free cash flow, compared with the index at 20. For a used-car retailer, these levels assume extremely robust, sustained profitability. Anything short of that introduces real risk.

Growth: The Bright Spot

If you’re looking for what supports Carvana’s run, this is it.

Over the past three years, the company has grown revenue at an average rate of 11.6%, more than double the broader market. In the last twelve months alone, revenue jumped from $13 billion to $18 billion, a striking 46% surge. The most recent quarter was even stronger, with revenue climbing 54.5% year-over-year to $5.6 billion.

For more details see: CVNA Revenue Comparison | CVNA Operating Income Comparison

Profitability: Better, But Still Thin

Here’s where the story gets more complicated. Carvana generated $1.7 billion in operating income over the last year, producing an operating margin of 9.4%. That’s a major improvement from the deep losses of 2022. But relative to the S&P 500’s nearly 19% average operating margin, it’s still slim.

Cash flow tells a similar story. Operating cash flow came in around $666 million, giving Carvana a cash-flow margin of 3.6%, while net income of $629 million reflects a 3.4% net margin. The rest of the market, by contrast, sits well into the double digits. The business works — but it isn’t yet a margin machine.

Financial Stability: Surprisingly Strong

Despite the lingering negativity from the 2022 meltdown, Carvana emerges from 2025 looking financially sturdy.

Debt totals $5.6 billion, modest relative to its market cap, and resulting in a debt-to-equity ratio of roughly 10.7%, comfortably better than the S&P average. Cash and equivalents make up $2.6 billion of $9.9 billion in assets, giving Carvana a cash-to-assets ratio near 27%, far above the broader market’s single-digit level.

Downturn Resilience: This Is the Red Flag

The stock’s sharp drawdowns during market shocks reveal its high-beta nature. During the 2022 inflation shock, CVNA cratered 99% from its 2021 peak — essentially a wipeout — compared with a 25% S&P decline. Though it eventually clawed back to its prior high by mid-2025, the journey took 947 days, roughly double the index’s recovery time. In the 2020 pandemic, the stock fell 73%, versus a 34% drop for the S&P. While Carvana rebounded quickly from that one (in just 77 days, faster than the market), the drawdowns themselves underscore how violently the stock can move in both directions. Read CVNA Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

Even outside crises, Carvana has a history of reacting sharply to earnings, guidance, and operational updates.

So Where Does This Leave You?

If you enjoy high-octane growth stories with real operational improvement, Carvana fits the bill. The turnaround is genuine, the S&P 500 inclusion adds validation, and revenue momentum is hard to ignore. But if you’re buying today, you’re paying a premium that assumes the next several years unfold without missteps. Carvana can keep growing, but a lot of that growth is already in the price.

You might want to consider the Trefis Reinforced Value (RV) Portfolio, which has surpassed its all-cap benchmark (a mix of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to deliver solid returns for investors. What accounts for this? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks offers a flexible strategy to capitalize on favorable market conditions while managing losses when markets decline, as explained in RV Portfolio performance metrics.

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