CVNA Shares Rally 11% In A Week, Now Is Not The Time To Buy The Stock

We believe there are only a couple of things to fear in CVNA stock given its overall Moderate operating performance and financial condition. But keeping in mind its Very High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $51 Bil in market cap, Carvana provides an e-commerce platform for buying and selling used cars with 360-degree vehicle imaging to help customers research and inspect vehicles.

[1] Valuation Looks Very High

This table highlights how CVNA is valued vs broader market. For more details see: CVNA Valuation Ratios

[2] Growth Is Very Strong

• Carvana has seen its top line grow at an average rate of 6.4% over the last 3 years
• Its revenues have grown 39% from $12 Bil to $16 Bil in the last 12 months
• Also, its quarterly revenues grew 41.9% to $4.8 Bil in the most recent quarter from $3.4 Bil a year ago.

This table highlights how CVNA is growing vs broader market. For more details see: CVNA Revenue Comparison

[3] Profitability Appears Very Weak

• CVNA last 12 month operating income was $1.5 Bil representing operating margin of 9.2%
• With cash flow margin of 4.4%, it generated nearly $724 Mil in operating cash flow over this period
• For the same period, CVNA generated nearly $563 Mil in net income, suggesting net margin of about 3.5%

This table highlights how CVNA profitability vs broader market. For more details see: CVNA Operating Income Comparison

[4] Financial Stability Looks Very Strong

• CVNA Debt was $6.1 Bil at the end of the most recent quarter, while its current Market Cap is $51 Bil. This implies Debt-to-Equity Ratio of 12.0%
• CVNA Cash (including cash equivalents) makes up $2.3 Bil of $9.4 Bil in total Assets. This yields a Cash-to-Assets Ratio of 24.8%

[4] Downturn Resilience Is Weak

CVNA has fared 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

• CVNA stock fell 99.0% from a high of $370.10 on 10 August 2021 to $3.72 on 27 December 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 31 July 2025
• Since then, the stock increased to a high of $390.17 on 31 July 2025 , and currently trades at $377.38

 
2020 Covid Pandemic

• CVNA stock fell 73.3% from a high of $110.09 on 21 February 2020 to $29.35 on 20 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 5 June 2020

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 CVNA 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 – S&P 500, Russell, and S&P midcap. 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.