Carvana Co Stock Gives All I
Carvana Co (NYSE: CVNA, 30 Financials) stock is estimated to be significantly overvalued, according to the GuruFocus Value calculation. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, the company’s past growth, and analysts’ estimates of the company’s future performance. If a share’s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 323.42 per share and market cap of $ 26.2 billion, Carvana Co stock would be significantly overvalued. The GF value for Carvana Co is shown in the table below.
Because Carvana Co is significantly overvalued, its long-term stock return is likely to be much lower than its future business growth, which has averaged 15.1% over the past five years.
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It is always important to check the financial strength of a company before buying its shares. Investing in companies with low financial strength presents a higher risk of permanent loss. Examining the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a business. Carvana Co has a cash-to-debt ratio of 0.14, which is worse than 82% of companies in the retail – cyclical sector. The overall financial strength of Carvana Co is 4 out of 10, which indicates that the financial strength of Carvana Co is low. Here is Carvana Co’s debt and cash flow over the past few years:
Investing in profitable businesses carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a business with high profit margins offers better performance potential than a business with low profit margins. Carvana Co has been profitable 0 years in the last 10 years. In the past 12 months, the company reported sales of $ 6.7 billion and a loss of $ 2.05 per share. Its operating margin of -3.77% worse than 76% of companies in the Retail – Cyclical industry. Overall, GuruFocus rates Carvana Co’s profitability as poor. Here is Carvana Co’s sales and net profit over the past few years:
One of the most important factors in the valuation of a business is growth. Long-term equity performance is closely linked to growth, according to GuruFocus research. Companies that grow faster create more shareholder value, especially if that growth is profitable. Carvana Co’s average annual revenue growth is 15.1%, which ranks better than 86% of companies in the retail – cyclical industry. The 3-year average EBITDA growth is 25.4%, which ranks better than 76% of companies in the retail industry – cyclical.
Another way to assess a company’s profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on Invested Capital (ROIC) measures how well a business generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company should pay on average to all of its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating shareholder value. Over the past 12 months, Carvana Co’s ROIC was -10.77, while its WACC was 17.05. Carvana Co’s historical ROIC vs WACC comparison is shown below:
Overall, the stock of Carvana Co (NYSE: CVNA, Financials at 30) gives all indications of a significant overvaluation. The company’s financial situation is bad and its profitability is bad. Its growth ranks better than 76% of companies in the Retail – Cyclical industry. To find out more about Carvana Co’s share, you can view its 30-year financial data here.
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