When Will Carvana Co. (NYSE:CVNA) Become Profitable?
Carvana Co.’s (NYSE:CVNA): Carvana Co., together with its subsidiaries, operates an e-commerce platform for buying used cars in the United States. The company’s loss has recently broadened since it announced a -US$64.5m loss in the full financial year, compared to the latest trailing-twelve-month loss of -US$90.0m, moving it further away from breakeven. As path to profitability is the topic on CVNA’s investors mind, I’ve decided to gauge market sentiment. In this article, I will touch on the expectations for CVNA’s growth and when analysts expect the company to become profitable.
See our latest analysis for Carvana
CVNA is bordering on breakeven, according to the 15 Specialty Retail analysts. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$90m in 2021. So, CVNA is predicted to breakeven approximately 2 years from now. How fast will CVNA have to grow each year in order to reach the breakeven point by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 81% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, CVNA may become profitable much later than analysts predict.
Underlying developments driving CVNA’s growth isn’t the focus of this broad overview, though, take into account that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one issue worth mentioning. CVNA currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and CVNA has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on CVNA, so if you are interested in understanding the company at a deeper level, take a look at CVNA’s company page on Simply Wall St. I’ve also put together a list of important factors you should further research:
Valuation: What is CVNA worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether CVNA is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Carvana’s board and the CEO’s back ground.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
