Does Carvana's High Price-to-Sales Multiple Still Make Sense?

Used car e-retailer Carvana Inc. CVNA is trading at a forward sales multiple of 3.65, well above the auto sector as well as its own five-year average.

To put it in perspective, that’s far higher than peers like CarMax KMX at 0.38, AutoNation AN at 0.29, and Lithia Motors LAD at 0.23.

So, has CVNA stock gotten ahead of itself? At first glance, it might look pricey. But with Carvana’s strong sales momentum, improving efficiency and high-growth expectations, this valuation premium may not be as stretched as it seems.

Last year, Carvana’s retail sales rose 33.1% year over year to 416,348 units.Retail units sold continued to grow in Q1’25, rising 45.7% on strong demand, well ahead of the single-digit growth reported by CarMax, AutoNation and Lithia Motors.

Encouragingly, Carvana is expected to have witnessed a sequential increase in retail unit sales in Q2, and management expects significant growth for full-year 2025.

Beyond strong sales, CVNA is focusing on enhancing operational efficiency across the business, with several technology, process, and product initiatives underway. The company cut reconditioning and transport costs through insourcing, process improvements, and better logistics.

Carvana reported record adjusted EBITDA of roughly $488 billion in Q1'25, which more than doubled from the year-ago quarter. It expects significant growth in adjusted EBITDA in 2025 as well. Currently, Carvana boasts the highest adjusted EBITDA margin among public car dealers at 11.5%, far ahead of its peers.

Image Source: Carvana, Inc.

Investors are noticing Carvana’s progress. The stock has rocketed more than 70% year to date, as against the auto sector’s 13.8% decline. In comparison, shares of CarMax and Lithia Motors have declined 13.6% and 1.3%, respectively, while AutoNation gained 25% over the same timeframe.

YTD Price Performance Comparison

The Zacks Consensus Estimate for CVNA’s annual earnings indicates a surge of 214% to $4.99 per share from $1.59 in 2024. Plus, FY26 EPS is projected to increase another 23% to $6.14.

Last Word

Even though Carvana looks expensive on paper, the market is responding to real results—and betting on more upside. Investors aren’t chasing hype; they’re following momentum. With industry-leading EBITDA margins and earnings expected to more than triple this year, the fundamentals are quickly catching up. As long as the growth story holds, Carvana’s elevated multiple doesn’t look out of place.

CVNA stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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

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