CVNA

We rate CARVANA CO. (CVNA) as a Hold with a composite score of 50.8/100 at a current price of $325.90. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (67th percentile) and quality (59th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (26th percentile) and stability (26th percentile) tempers our overall conviction. We assign a Narrow Moat rating (65/100), Very High uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

CARVANA CO. holds a top-quartile position (#0 of 50) within the Retail Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 50.8/100 places it at rank #1883 in our full 7,333-stock universe. With a $52.1B market capitalization, CARVANA CO. operates at meaningful scale within the Retail Trade sector, providing competitive advantages in distribution, procurement, and customer reach.

The near-term outlook is constructive, with revenue growing at 66% and momentum in the 67th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 26th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 22% (-14.6pp vs sector) narrow to operating margins of 10% (+5.8pp vs sector) and net margins of 6.0%, yielding a gross-to-net conversion rate of 28%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $325.90, CARVANA CO. is trading near fair value based on current fundamentals. Our value factor score of 42/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 43.6x (a 103% premium to the sector median of 21.4x), EV/EBITDA of 30.8x (at a premium), P/B of 11.3x, P/S of 2.6x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Very High uncertainty rating to CARVANA CO.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 2.42), significant leverage (117% debt-to-equity), below-average price stability (26th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.42); significant leverage (117% debt-to-equity); below-average price stability (26th percentile); elevated valuation multiple (P/E 43.6x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 26th percentile and quality factor at the 59th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: large-cap scale ($52.1B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate CARVANA CO.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 26.0%, and the balance sheet is managed within acceptable parameters (D/E: 117%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; CARVANA CO. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, CARVANA CO. receives a Hold rating with a composite score of 50.8/100 (rank #1883 of 7,333). Our quantitative framework assigns a Narrow Moat (65/100, trend: stable), Very High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 44/100.

Our analysis supports a neutral stance on CARVANA CO.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.