Carvana (CVNA) just fueled up and is on the road to better days ahead. After falling below $4/share earlier in January of this year, the stock is back up to where it once sat at $53/share. We’ve witnessed an impressive 141% turnaround in the last year, and nearly 35% of that came just this morning in Wednesday’s trading session.
The company is confident they have a handle on debt after releasing a statement on its restructuring plan. Carvana is going to manage to reduce its outstanding debt by a whopping $1.2 billion. By exchanging existing unsecured debt with new notes, the company will save as much as $430 in interest expenses over the next two years.
Along with this, the company has the option to issue $350 in new stock to raise funds and cut into the debt burden that has held them back. But, fighting back against debt was just half of the good news Carvana had to share this morning. The auto retailer also released quarterly earnings that topped analyst expectations.
While vehicle unit sales narrowly fell short of the estimate (76,530 cars sold compared to 76,937 cars sold) revenue and profit soared. Revenue of $2.96 billion beat out the $2.55 billion projection. Meanwhile, Wall Street was looking for adjusted EBITDA around the $57.5 million range. But, Carvana delivered $155 million in adjusted EBITDA.
We last discussed Carvana in February after it lost 98% of its value. At the time, things were looking pretty bleak for the company and its investors. But today, an entirely different picture exists. It’s safe to say that Carvana has turned things around.
That being said, is it enough to justify buying this stock now? We’ve taken a look at CVNA through the VectorVest stock forecasting software and found 3 things you need to see before you make a decision one way or the other.
But the truth is, we’ve dug deeper into CVNA using the VectorVest stock analyzing software and found real cause for concern…
While CVNA Still Has Very Poor Upside Potential and Poor Safety, the Stock Has Excellent Timing Right Now
The VectorVest system helps you uncover winning opportunities on autopilot and execute your trading strategy with less time, effort, and error. It’s all thanks to a proprietary stock rating system that tells you what to buy, when to buy it, and when to sell it.
Three ratings give you all the insights you need: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on its own scale of 0.00-2.00, with 1.00 being the average.
This makes your analysis quick and easy. But, it gets even easier. Because based on the overall VST rating of a given stock, the system issues a clear buy, sell, or hold recommendation at any given time. That being said, here’s the situation with CVNA right now:
- Very Poor Upside Potential: While it’s exciting to see that CVNA has turned things around, it’s fair to question the long-term price appreciation potential of this stock. The RV rating is as poor as it gets at 0.01. This is derived through a comparison of the stock’s 3-year price projection to AAA corporate bond rates and risk. All of this being said, the stock is overvalued with a current value of just $1.59.
- Fair Safety: Despite the positive strides the company has taken, CVNA still has poor safety with an RS rating of just 0.67. This is calculated through a detailed analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Very Poor Timing: The one thing CVNA has going for it right now is a positive price trend with strong momentum pushing the stock higher and higher. As a result, the RT rating is excellent at 1.89. This is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
All that being said, CVNA has a good overall VST rating of 1.23. Does it earn the stock a buy recommendation, though? Or, should you hold off a bit longer to see if the stock can hold the ground it's regained?
Don’t play the guessing game or let emotion cloud your judgment. Get a clear buy, sell, or hold recommendation through a free stock analysis at VectorVest today and make your next move with complete confidence and clarity!
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for CVNA, the stock has climbed back to where it once stood after losing a whopping 98% of its value. The turnaround is impressive, and the stock has excellent timing. But, very poor upside potential and poor safety may still be holding it back.
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