Carvana CVNA has staged a jaw-dropping comeback from once being on the verge of collapse. Year 2023 marked Carvana’s remarkable revival after a 98% plunge in 2022, and the rally continued in 2024 as well.  The used-car e-commerce player defied the odds, bouncing back through deep cost cuts and a debt overhaul—reviving investor interest in one of the pandemic era’s most dramatic stories.

Over the past year, CVNA stock has rocketed 196%. In contrast, its closest competitor CarMax KMX declined 5% in the same timeframe. Meanwhile, another peer Sonic Automotive SAH rose 19% over the past year.

 1-Year Price Performance

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Given Carvana’s massive run-up, investors may be wondering whether to take profits or buy for further gains. Let’s look at the fundamentals to find out.

4 Key Growth Drivers for Carvana

Retail Sales Increasing: Retail sales volumes have been on the rise, with the company selling more than 100,000 cars in each of the last three reported quarters. In the final quarter of 2024, retail units sold jumped 50% year over year, and Carvana expects continued sequential growth in the first quarter of 2025 and significant expansion throughout the year. Comparatively, CarMax saw a 6.2% increase in retail used unit sales. For Sonic Automotive, used vehicle units retailed in the last reported quarter were up 5% in the Franchised dealerships segment and down 5% in the EchoPark segment.

Cost Cut Efforts Paying Off: Carvana’s three-step plan—achieving positive adjusted EBITDA, boosting EBITDA per unit, and returning to growth with a leaner model—is delivering. The company has cut retail reconditioning and inbound transport costs, driving significant margin improvement. In 2024, Carvana reported record adjusted EBITDA of $1.4 billion and an industry-leading 10.1% margin. It expects further gains in 2025 from ongoing efficiency efforts. In comparison, Sonic Automotive posted a 4% adjusted EBITDA margin in 2024, and CarMax also recorded a 4% EBITDA margin in fiscal 2025 (ended Feb 28, 2025).

Strategic Buyout: Carvana’s acquisition of ADESA’s U.S. operations has strengthened its logistics, auction and reconditioning capabilities. Leveraging ADESA’s infrastructure, Carvana can significantly scale its refurbishment processes — boosting both vehicle quality and volume. At full utilization, the deal is expected to unlock around 3 million units of annual reconditioning capacity, up from the current 1.3 million.

Ample Market Opportunity: Carvana—being the second largest used car retailer in the country—still holds only a 1% share of the highly fragmented U.S. automotive retail market. This suggests that there is enough room for the company to expand, especially as more consumers gravitate toward online car buying.

CVNA’s Premium Valuation Justified?

Carvana is trading at a forward sales multiple of 2.5X, way above its median of 1.95X, over the past five years. Meanwhile, KMX and SAH’s forward sales multiple sits at 0.36X and 0.14X, respectively.

CVNA's P/S Vs. KMX & SAH

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Carvana does seem pricey. But its valuations also reflect its high growth expectations and improving profitability. If the company sustains its execution, the premium could be warranted.

What Do Zacks Estimates for CVNA Say?

The Zacks Consensus Estimate for CVNA’s 2025 sales and EPS calls for a year-over-year uptick of 24% and 119%, respectively. The consensus mark for CVNA’s 2025 and 2026 EPS estimates has moved north over the past 30 days.

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Carvana is a Buy Now

Carvana’s streamlined operations, scalable platform and distinctive business model — which includes the first fully-automated, coin-operated car vending machine in the United States —position it well for long-term growth. Despite near-term economic headwinds, the company’s operational discipline and improving fundamentals suggest more upside ahead. The company carries a Zacks Rank #2 (Buy) currently.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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This article originally published on Zacks Investment Research (zacks.com).

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