• If you are trying to figure out whether Carvana's current share price lines up with its underlying value, this article will walk through the key numbers and what they might mean for you.
• Carvana last closed at US$455.02, with a 7 day return of a 0.8% decline, a 30 day return of 4.9%, a year to date return of 13.7% and a 1 year return of 94.4%. The 3 year return is very large at around 70 times, and the 5 year return is 90.1%.
• Recent coverage around Carvana has focused on its business model, balance sheet repair efforts and shifting sentiment toward online used car platforms. This helps frame how traders and longer term holders are reacting to the stock. This wider conversation sets the backdrop for assessing whether recent price moves are supported by fundamentals or are more about changing risk appetite.
• Right now Carvana has a valuation score of 0/6, which raises fair questions about how different valuation approaches treat the stock. We will walk through those methods next before finishing with an even more practical way to think about value.

Carvana scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Carvana Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash flows a company is expected to generate in the future, then discounts them back to a single value today. It is essentially asking what those future dollars are worth in your hand right now.

For Carvana, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month Free Cash Flow is about $520.3 million. Analysts provide detailed Free Cash Flow projections out to 2029, and Simply Wall St then extrapolates further to 2035. On this basis, projected Free Cash Flow for 2030 is $4.2b, with later years continuing to use those extrapolated estimates.

Pulling all of those projected cash flows together and discounting them back to today, the model arrives at an estimated intrinsic value of about $405.04 per share. Compared with the recent share price of $455.02, the DCF suggests Carvana trades at roughly a 12.3% premium, so the stock screens as overvalued under this method.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Carvana may be overvalued by 12.3%. Discover 876 undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Carvana Price vs Earnings

For profitable companies, the P/E ratio is a useful way to link what you are paying for each share to the earnings that support that price. It gives you a quick sense of how much the market is willing to pay today for each dollar of current earnings.

What counts as a "fair" P/E often reflects two big forces: how quickly earnings are expected to grow, and how much risk investors see in those earnings. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually goes with a lower P/E.

Carvana currently trades on a P/E of 102.31x. That compares with a Specialty Retail industry average P/E of about 20.72x and a peer average of 19.75x, so the stock is priced well above these basic benchmarks. Simply Wall St also calculates a proprietary Fair Ratio for each company. For Carvana, the Fair Ratio is 37.42x, based on factors like its earnings profile, industry, profit margins, market cap and risk characteristics. This tailored Fair Ratio can be more informative than a straight peer or industry comparison because it aims to reflect company specific drivers rather than broad group averages. Setting that Fair Ratio of 37.42x against the actual P/E of 102.31x suggests Carvana is trading on a materially higher multiple than this framework would point to.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1444 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Carvana Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your own story about Carvana tied directly to numbers like fair value, future revenue, earnings and margins.

A Narrative on Simply Wall St links three things in one place: the company story you believe in, the financial forecast that flows from that story, and the fair value that drops out of those assumptions so you can see how it all connects.

These Narratives live on the Community page used by millions of investors. They stay updated when new information such as news or earnings arrives, and help you decide what to do by comparing each Narrative fair value to Carvana’s current share price so you can see whether your story says it looks cheap, expensive, or roughly in line with the market.

For example, one Carvana Narrative might assume stronger revenue growth and higher long term margins that support a higher fair value. Another might assume more modest growth and tighter margins that point to a lower fair value, giving you a clear view of how different perspectives translate into different price signals.

Do you think there's more to the story for Carvana? Head over to our Community to see what others are saying!

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.