Long-established in the Vehicles & Parts industry, Carvana Co (CVNA, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 2.57%, juxtaposed with a three-month change of 98.13%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Carvana Co.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 3/10
- Profitability rank: 3/10
- Growth rank: 8/10
- GF Value rank: 4/10
- Momentum rank: 3/10
Based on the above method, GuruFocus assigned Carvana Co the GF Score of 67 out of 100, which signals poor future outperformance potential.
Carvana Co: A Snapshot of Its Business
Carvana Co is an e-commerce platform for buying and selling used cars. The company derives revenue from used vehicle sales, wholesale vehicle sales, and other sales and revenues. The other sales and revenues include sales of loans originated and sold in securitization transactions or to financing partners, commissions received on VSCs and sales of GAP waiver coverage. The foundation of the business is retail vehicle unit sales. This drives the majority of the revenue and allows the company to capture additional revenue streams associated with financing, VSCs, auto insurance and GAP waiver coverage, as well as trade-in vehicles.
Financial Strength Analysis
Carvana Co's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0 positions it worse than 0% of 989 companies in the Vehicles & Parts industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Scoreis just 0.94, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.07 indicates a struggle in handling existing debt levels.
Profitability Analysis
Carvana Co's low Profitability rank can also raise warning signals. Additionally, Carvana Co's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 10.06; 2019: 12.87; 2020: 14.21; 2021: 15.05; 2022: 9.16. This trend underscores the company's struggles to convert its revenue into profits.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
