Carvana Co (CVNA, Financial) has recently experienced a daily loss of -5.96%, despite a 3-month gain of 30.36%. With a Loss Per Share of 6.07, investors are left questioning whether the stock is significantly overvalued. This article delves into the valuation analysis to provide a clearer picture of Carvana Co's financial status.
Company Introduction
Carvana Co is an innovative e-commerce platform that has revolutionized the buying and selling of used cars. The company's revenue streams from vehicle sales, financing, and insurance services form the backbone of its business model. A critical aspect of understanding Carvana Co's financial health is comparing its current stock price to the GF Value, a measure of fair value. This comparison will offer insights into whether the company's stock is trading at a fair price.
Summarize GF Value
The GF Value is a proprietary calculation that determines the intrinsic value of a stock. It factors in historical trading multiples, a GuruFocus adjustment for past performance, and future business estimates. When a stock's price significantly exceeds the GF Value Line, it is considered overvalued, and the opposite holds true for undervalued stocks. Carvana Co, with a market cap of $6.20 billion, appears to be significantly overvalued at its current price of $54.74 per share.
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Financial Strength
Assessing a company's financial strength is vital to avoid the risk of permanent capital loss. Carvana Co's cash-to-debt ratio of 0.09 is lower than 87.71% of its peers in the Vehicles & Parts industry, signaling weak financial robustness. With an overall financial strength rating of 3 out of 10, Carvana Co's fiscal health is a concern.
Profitability and Growth
Profitability is a less risk proposition for potential investors, and Carvana Co's track record is less than ideal. With a Loss Per Share of $6.07 and an operating margin of -4.24%, the company's profitability ranking is a low 3 out of 10. However, Carvana Co's average annual revenue growth of 17.1% outperforms 78.82% of industry competitors, indicating some growth potential.
Regarding growth, Carvana Co's 3-year average EBITDA growth rate is -60.1%, ranking lower than 97.23% of industry peers, which is a significant concern for future value generation.
ROIC vs WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is crucial for assessing a company's profitability. Carvana Co's ROIC of -6.72% is well below its WACC of 14.72%, indicating inefficiencies in generating cash flow relative to capital invested.
Conclusion
Overall, Carvana Co (CVNA, Financial) stock appears to be significantly overvalued. The company is facing financial challenges, with poor profitability and growth rankings that are concerning. For a detailed analysis of Carvana Co's financials, investors can explore the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
