Carvana (CVNA): Assessing Valuation After Strong 1-Year Shareholder Returns

Carvana (CVNA) shares saw muted movement at the last close, dipping slightly despite recent momentum over the past month. Investors continue to watch how the company’s ongoing performance might shape sentiment as broader market trends develop.

See our latest analysis for Carvana.

After an impressive run earlier this year, Carvana’s 1-year total shareholder return clocks in at a robust 123%, hinting at renewed optimism around its turnaround story. The momentum has steadily built, with the year-to-date share price up nearly 98% as markets continue to reassess the company’s growth prospects and risk profile.

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But with Carvana’s valuation soaring in tandem with its performance, the key question for investors now is whether there is still room for upside, or if the current stock price is already factoring in all future growth potential.

Most Popular Narrative: 4.7% Undervalued

Carvana's most widely followed narrative sees its fair value at $414.20, which is higher than the last close price of $394.71. This sets the stage for a bullish outlook, grounded in expectations for rapid growth and operational gains.

The acceleration in consumer preference for purchasing vehicles online and increased comfort with high-value e-commerce transactions positions Carvana to capture a larger share of the used vehicle retail market. This supports outsized long-term unit and revenue growth. Ongoing advancements in Carvana's data-driven technology, including integration of AI for operational efficiency and customer-facing processes, enable continual process improvement, reducing per-unit costs and fueling net margin expansion.

Read the complete narrative.

Want to see why analysts are backing up this valuation? There is a set of disruptive growth forecasts and bold margin expectations underlying these numbers. The supporting calculations might surprise you. See what projections drive this price before the market catches up.

Result: Fair Value of $414.20 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks such as operational bottlenecks or slower than expected utilization gains could quickly challenge these bullish outlooks and shift momentum.

Find out about the key risks to this Carvana narrative.

Another View: High-Earnings Ratio Raises Eyebrows

Switching approaches, the most common valuation multiple is hinting at a different story. Carvana is trading at a staggering 96.8x its earnings, while industry peers average just 17.2x. Our fair ratio is estimated at 41.7x. This wide gap increases the risk that the market is pricing in a lot of future success. Is the optimism justified, or could expectations get ahead of reality?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Carvana Narrative

If you see the picture differently or want to dig into the numbers yourself, it’s quick and easy to assemble your own Carvana story in just a few minutes. Do it your way

A great starting point for your Carvana research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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