Carvana Co. (CVNA) Is Gaining Attention: Key Information to Consider Before Investing

Carvana (CVNA): Key Insights for Investors

Carvana (CVNA) has recently attracted significant attention from investors and market watchers. To better understand its potential trajectory, let's examine several important factors that could influence its short-term performance.

Recent Stock Performance

Over the past month, Carvana's shares have declined by 18.3%. In comparison, the Zacks S&P 500 composite index saw a slight decrease of 0.3%, while the Zacks Internet - Commerce sector, which includes Carvana, dropped by 12.4%. This raises the question: where might Carvana's stock head next?

Fundamental Drivers vs. Market Speculation

Although news and speculation about a company's future can cause swift changes in stock price, long-term investment decisions are ultimately shaped by core fundamentals.

Earnings Estimate Adjustments

At Zacks, the focus is on tracking changes in projected earnings, as these forecasts are central to determining a stock's fair value. Analyst revisions to earnings estimates, based on current business trends, often signal future price movement. When estimates rise, the stock's perceived value increases, prompting buying activity and price gains. Studies show a strong link between earnings estimate trends and short-term stock price changes.

For the current quarter, Carvana is expected to report earnings of $1.62 per share, reflecting a 7.3% increase year-over-year. However, the Zacks Consensus Estimate has dropped by 12.1% in the past month.

The consensus forecast for the current fiscal year is $7.1 per share, a decrease of 16% from last year, and this estimate has fallen by 2.2% over the last 30 days.

Looking ahead to the next fiscal year, analysts expect earnings of $9.6 per share, which would be a 35.3% increase compared to the previous year. This estimate has declined by 14.4% in the past month.

Zacks Rank, a proprietary rating system with a strong audited track record, leverages earnings estimate revisions to predict near-term stock direction. Given the recent changes in consensus estimates and other related factors, Carvana currently holds a Zacks Rank #3 (Hold).

The following chart illustrates the progression of Carvana's forward 12-month consensus EPS estimate:

Revenue Growth Outlook

While earnings growth is a key indicator of financial strength, sustained revenue expansion is essential for long-term profitability. For Carvana, the consensus sales estimate for the current quarter is $5.99 billion, representing a 41.6% increase year-over-year. Estimates for the current and next fiscal years are $26.6 billion and $34.3 billion, reflecting growth rates of 30.9% and 28.9%, respectively.

Recent Results and Earnings Surprises

In the most recent quarter, Carvana reported revenues of $5.6 billion, up 58% from the prior year. Earnings per share (EPS) reached $4.22, compared to $0.56 a year earlier.

These results exceeded the Zacks Consensus Estimate of $5.22 billion in revenue by 7.32%, and the EPS surprise was a remarkable 273.45%.

Over the last four quarters, Carvana has beaten consensus EPS estimates three times and surpassed revenue expectations in each quarter.

Valuation Analysis

Assessing a stock's valuation is crucial for making informed investment decisions. Comparing current valuation multiples—such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF)—to historical values and industry peers helps determine whether a stock is fairly priced.

The Zacks Value Style Score, which evaluates both traditional and alternative valuation metrics, ranks stocks from A to F. Carvana currently receives a D rating, indicating it trades at a premium compared to its peers.

Conclusion

The information presented here, along with additional resources on Zacks.com, can help investors decide whether to follow the market buzz surrounding Carvana. Its Zacks Rank #3 suggests the stock may perform similarly to the broader market in the near term.

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