CVNA

Carvana has completed one of the more dramatic operating turnarounds in retail. After a near-death FY2022 (-$1.59B net loss on $13.6B revenue), FY2025 delivered $20.3B revenue (+48.6%), $1.88B operating income (+90%), and $1.41B net income (+570%) on 596,641 retail units (+43.3% per MD&A). This is not financial-engineering profit: operating margin expanded to 9.3% and operating cash flow was positive at $1.04B against light capex of $147M, evidence that the centralized e-commerce model is finally throwing off the operating leverage management has long promised. The balance sheet de-risked in parallel — stockholders' equity rose 173% to $3.44B, long-term debt fell 8.1% to $4.83B, cash sits at $2.33B, and accumulated deficit narrowed to essentially breakeven (-$9M). ROE of 40.9% is exceptional for an auto retailer.

The valuation is the crux of the call. At $66.56 the stock trades at 7.9x FY diluted EPS of $8.45 — a multiple that implies stagnation or decline, directly contradicting 48% top-line and 570% bottom-line growth. On a growth-adjusted basis that is cheap; even a re-rate to a still-modest ~12x earnings supports meaningful upside, hence the ~$98 target. A mediocre, cyclical retailer at this price would be a hold; a business compounding units 40%+ with improving margins at sub-8x is a buy.