Evaluating Carvana After Its 70% 2025 Surge and Market Volatility

Wondering what to make of Carvana after its wild ride? If you’ve been tracking this stock, you know it doesn’t just follow the market; it tends to chart its own course. Carvana’s share price has soared a remarkable 1,756.6% in the past three years, while the climb of nearly 69.5% year-to-date hints that big shifts could still be ahead. Yes, the last month and week have seen pullbacks of -6.5% and -8.5% respectively, but those kinds of swings are not unusual for a stock that’s been redefining how cars are bought and sold online.

This rollercoaster of performance reflects not just changing consumer buying habits, but also a shift in how investors view risk and potential in the digital retail space. As broader market dynamics and sentiment towards tech-heavy disruptors ebb and flow, Carvana has felt the full effects, sometimes to the upside, sometimes not so much. Despite those jaw-dropping long-term gains, our valuation assessment gives Carvana a value score of 1 out of 6, indicating it currently meets just one undervaluation check. Does that mean it’s overpriced, or is the market looking at something others are missing?

Let’s break down what those valuation checks actually mean, and how Carvana stacks up across various approaches. Plus, we’ll dig into an even more insightful way to think about valuation that smart investors won’t want to miss.

Carvana scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Carvana Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model projects a company’s future cash flows and then discounts those numbers back to today, aiming to estimate a fair value for Carvana based on its ability to generate cash in coming years. By grounding the price in real, anticipated dollars instead of just market sentiment, DCF models allow investors to cut through some of the short-term noise that affects share prices.

According to the latest data, Carvana’s current Free Cash Flow stands at $565.5 Million. Analyst forecasts suggest this will grow rapidly, with projections reaching $3.1 Billion by 2029. Initial five-year estimates, provided by multiple analysts, are supplemented by Simply Wall St’s own extrapolations for later years. This reflects both direct market insight and modeled assumptions about continued growth. All projections are reported in $.

Based on these projected cash flows, the DCF model yields an intrinsic value for Carvana of $329.15 per share. Given the implied discount of -2.8%, the stock appears just slightly overvalued compared to this estimate. In other words, the current market price is very close to the DCF’s fair value assessment.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Carvana.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Carvana's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Carvana Price vs Earnings

For companies that are profitable, the Price-to-Earnings (PE) ratio is often the go-to metric for investors, as it tells you how much you are paying for each dollar of current earnings. It is a straightforward way to compare valuation across companies, especially when they are making consistent profits.

However, not all PE ratios are created equal. Growth expectations and company-specific risks play a major role in what should be considered a “normal” or “fair” PE for any given business. If a company is expected to grow quickly or is considered lower risk, investors may be willing to pay a higher PE. Conversely, slower growth or higher risk typically means a lower fair multiple.

Carvana currently trades at a lofty PE ratio of 83x. For context, the specialty retail industry averages just 16.3x, and peers average around 22x. Simply Wall St’s proprietary “Fair Ratio” for Carvana, based on factors like its earnings growth outlook, margins, market size and unique risks, comes in at 41.2x. This Fair Ratio gives a more meaningful benchmark than a simple comparison with industry or peers because it is tailored to Carvana’s real prospects and challenges, rather than relying on broad averages that might not fit the company’s specific situation.

With Carvana’s actual PE far higher than its own Fair Ratio, the current price suggests investors are paying a significant premium above what the company’s fundamentals justify.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Carvana Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your story about where you believe a company like Carvana is headed, connecting your assumptions about its future revenue, earnings, and margins with a reasoned estimate of fair value. By tying together a company’s unique story, such as growth drivers, risks, and market dynamics, with a financial forecast, Narratives help transform numbers into an actionable investment view.

On Simply Wall St’s Community page, Narratives make this process easy and accessible, allowing millions of investors to build, share, and refine their perspectives with just a few clicks. Narratives help you decide when to buy or sell by making it clear how your fair value compares with the latest share price, and they update automatically when new information like earnings or news comes in, so your view always reflects what’s happening now.

For example, one Carvana Narrative might be built on rapid online adoption and expansion, projecting $3.5 billion in 2028 earnings and a fair value around $500 per share, while another more cautious Narrative could see earnings closer to $903 million and a fair value of just $330. This shows how different expectations and stories can lead to different investment decisions.

Do you think there's more to the story for Carvana? Create your own Narrative to let the Community know!

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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