Carvana's stock deemed unworthy at $220

In the recent assessment of Carvana's stock performance, concerns about its valuation have emerged, especially as the company's shares currently trade at approximately $220. While Carvana's revenues saw a notable increase of 26.9% in the last 12 months, its growth rates still lag behind those of the S&P 500. Over the past three years, the average growth rate for Carvana has been a modest 4.1%, while the S&P 500 achieved an increase of 6.3%. The company's operating income revealed a concerning margin of 7.2%, well below the 13.0% mark for the S&P 500, posing challenges for profitability. Furthermore, the valuation metrics, including a price-to-earnings ratio of 33.1 compared to 24.3 for the benchmark, amplify the concerns, indicating that potentially high expectations have not been met by performance. Despite a strong debt-to-equity ratio of 19.9%—which is slightly higher than the benchmark's 19.0%—the overall financial stability of Carvana remains strong. However, resiliency in economic downturns can be questioned, as the stock has historically fared worse than the S&P 500 during significant market declines. Given all these factors, there is a prevailing belief that the stock, despite its revenue growth, is unattractive for investment at its current price point. Investors are advised to exercise caution.