How Much Is Carvana Worth?

Investors use various metrics to value companies, but in terms of market capitalization — which is one of the most popular — Carvana has a market capitalization of about $5.5 billion.

Carvana’s purpose is to change the way people buy and sell cars by taking the process online and making it easier. Thanks to companies like Carvana, the idea of making a large purchase like a car online — once considered unfathomable — has been normalized.

To see how much the company is worth, take a look at this snapshot of the current state of Carvana, along with a discussion of its history, value and future outlook.

How Much Is Carvana Worth Now?

Carvana shares dropped from a high of about $153 in February 2022 to $52.10 on August 12, 2022. Carvana’s share price reached over $361 one year from its current low of $52. As of August 2022, the company’s value has dropped significantly to $5.5 billion.

But what does it mean to say a company “is valued” at $5.5 billion? Market pundits use market capitalization to determine how much a company is worth.

Carvana’s Market Cap

Carvana’s market cap varies from moment to moment based primarily on its share price, which was $52.10 when the market closed on August 12. Although an increase in outstanding shares could also increase its market cap, that type of change occurs far less frequently than a change in share price, which can occur in less than one second.

Carvana’s market cap has fluctuated proportionately to the stock prices over the same period. Thus, the ups and downs of Carvana’s share price can result in a wide valuation range for the company.

What Is Market Capitalization?

Market capitalization is simply the number of outstanding stock shares a company has issued times its current market price. So, for example, if a company has issued 1 million shares of stock and its share price is $50, the company has a market capitalization of $50 million.

Carvana currently has 105.80 million shares outstanding, so 105.80 million times the closing stock price of $52.10 on August 12 equals about $5.5 billion. Compare that to the high one year before of $365.04 per share for a market cap of $38.6 billion.

Market cap does have its drawbacks as an evaluation method, however. For starters, market cap changes frequently, and it’s closely tied to the company’s current share price. It doesn’t take into account any of the direct financial metrics of the company, such as earnings per share, growth rate or book value.

By way of comparison, the price/earnings ratio, which is another popular valuation method, is also closely tied to a company’s market share price. The P/E ratio also relies heavily on a company’s earnings, which some investors feel is a more important determinant of a company’s valuation.

Calculating Carvana’s Net Worth

Carvana’s net worth as of the fiscal year ending Dec. 31, 2021, was $525 million. In its simplest form, net worth is a company’s assets minus its liabilities.

Of course, methods of determining the value of a company are wide and varied, each with its own merits and blind spots.

GOBankingRates uses company data to calculate net worth in a slightly different manner. The GOBankingRates company net worth is a calculation of a company’s worth based solely on concrete, measurable figures like assets and revenue. It’s a more conservative valuation than most, taking into account only full-year profits and revenue from the last three years and the company’s assets and debts.

By this GOBankingRates metric, Carvana’s net worth is currently $9,412,833,000.

Carvana’s Founders

Carvana’s CEO, president and chairman, Ernie Garcia III, got the idea for Carvana while working for his father’s company, DriveTime. The idea came from wholesale car auctions, which take about 30 seconds and offer a return policy.

Garcia III thought that retail customers would much prefer that type of car-buying experience rather than the traditional, four-plus-hour negotiation process with a traditional dealer. This Carvana founder’s net worth is currently $1.4 billion.

Ben Huston co-founded Carvana and has served the company as its chief operating officer ever since. Ryan Keeton is Carvana’s chief brand officer — a role he has filled since helping co-found the company in 2012.

Key Product Lines Contributing to Revenue

Carvana has one primary focus as a company, and that is to disrupt the automotive sales industry through the application of technology. Carvana’s goal is to provide a seamless online auto-buying experience for its customers.

In addition to earning money from automotive sales and purchases, Carvana generates revenue from vehicle financing and ancillary products like gap insurance and vehicle service contracts.

Here are some of the earnings highlights from Carvana’s fourth-quarter and full-year earnings report for fiscal year 2021, which ended Dec. 31, 2021:

Second Quarter 2022

• Retail unit sales jumped almost 9% compared to Q4 2021, to 117,564

• Revenue grew 16% compared to Q4 2021, to $3.884 billion

• Total gross profit was down 28% compared to Q4 2021, to $396 million

• Gross profit per unit was $3,368 compared to $4,566 in Q4 2021

Full Year 2021

• Retail unit sales jumped almost 74% compared to 2020, to 425,267

• Revenue grew 129% compared to 2020, to $12.814 billion

• Total gross profit rose 142.9% compared to 2020, to $1.929 billion

• Gross profit per unit was $4,537, up 39.5% from $3,252 in 2020

Carvana’s Top 10 Shareholders

The top 10 shareholders of Carvana stock are all asset managers or mutual fund companies. Here’s what the top shareholders list looks like:

1. T. Rowe Price Associates, 11.84%

2. Baillie Gifford and Company, 9.61%

3. The Vanguard Group, 7.84%

4. Tiger Global Management LLC, 7.52%

5. Morgan Stanley Investment Management, 6.32%

6. Spruce House Investment Management, LLC, 5.42%

7. FMR LLC, 4.99%

8. Blackrock Inc., 4.50%

9. CAS Investment Partners, LLC, 3.67%

10. Goldman Sachs Group Inc., 3.00%

All of these shareholders may change their level of investment at any time — even dropping it down to 0%. But since Carvana is currently such a popular company, these percentages might not change by a great amount. This lack of change is particularly true for the index funds on the list, as by fund mandate, they are required to match the company’s weighting in their respective index.

How Does the Future Look for Carvana?

It’s hard to deny that Carvana has grown tremendously over the past few years and is a Wall Street darling.

The company is well-positioned to grow — and in fact, is expanding, with two new facilities for painting, repair and detailing coming to San Antonio, a new car vending machine slated for Virginia and new online car shopping for as-soon-as-next-day delivery for Des Moines, Iowa, all of which the company announced the week of November 15.

Carvana has also become user-friendly for mobile users, as consumers are becoming more comfortable with online transactions.

Outlook

Judging by recent trends, the future seems to look rosy for Carvana. Although the company has suffered some COVID-related disruptions since the beginning of the pandemic and will continue to face challenges in 2022 due in part to inventory shortages and supply chain problems, the company shows promise.

Retail unit sales jumped almost 9% compared to Q4 2021, to 117,564, and revenue grew 16% compared to Q4 2021, to $3.884 billion despite total gross profit being down 28%.

Wall Street analysts tend to agree on an average recommendation of “hold.” The current average price target is $79.76, an upside of 53% from the current price of $52.10.

Is Carvana Worth the Money?

Carvana seems like a good bet as part of a diversified portfolio, but only if you have a high risk tolerance. The company has lost a considerable chunk of its market cap, but so have most of the companies trading.

Investing in a specific stock involves much more than analyzing the profitability of a given company. Your financial situation plays a large part in determining whether or not you should invest in stocks at all — let alone invest in a specific stock like Carvana.

Working with a fiduciary financial advisor is a good way to delineate your investment objectives, risk tolerance and personal financial situation to determine if investing in stocks is a good match for you.

Daria Uhlig and Cynthia Bowman contributed to the reporting for this article.

Data is accurate as of Aug. 15, 2022, and subject to change.

Methodology: The GOBankingRates Evaluation assesses a company’s net worth based on the company’s total assets, total liabilities, and revenue and net income from the last three years. Base value is established by subtracting total liabilities from total assets from the company’s last full fiscal year. Income value is established by taking the average of the revenue from the last three full fiscal years, plus 10 times the average of the net profits from the last three full fiscal years, and then calculating the average of those two figures. The final GOBankingRates Evaluation number is the sum of the base value and the income value.

This article originally appeared on GOBankingRates.com: How Much Is Carvana Worth?