From its initial public offering to its all-time high of $370.10 in August 2021, Carvana (CVNA -0.36%) saw its stock price skyrocket an incredible 3,200%. This performance crushed the Nasdaq Composite Index's total return of 147% during the same time. And after a number of adverse factors punished shares in 2022, the stock has risen more than 100% so far this year (as of March 3), a possible sign of renewed investor enthusiasm. 

Is this e-commerce used car retailer a growth stock that can double again? Let's take a closer look. 

Hitting a rough patch 

To say that Carvana hit a rough patch last year would be an understatement. Persistent inflation and rising interest rates make buying cars unaffordable. Making matters worse, used car prices in 2022 were up 55% versus 2019. And after posting monster growth throughout its history, the company's 2022 revenue of $13.6 billion was up just 6% year over year, with fourth-quarter sales down 24%. Used car volume trended downward in 2022, but it bounced back in January this year.  

Because Carvana carries nearly $7 billion in debt on its balance sheet, it doesn't really have much financial flexibility. In the fourth quarter, gross profit totaled just $193 million, but the interest expense was an eye-watering $153 million. Shrinking gross profit, coupled with higher interest expenses, is crippling Carvana. 

A big red flag for Carvana is that it is entirely dependent on a robust economy for its business to not only succeed and grow, but to simply survive. Whatever happens with inflation, interest rates, and the broader economy on a quarter-by-quarter basis is anyone's guess. This makes it inherently difficult for management to find the right balance between investing aggressively to achieve greater market share and optimizing the financials.  

The good news is that the economy is in expansion mode more often than it's in contraction mode. The bad news, however, is that we never know when a downturn will happen. And it's how a company handles a downturn that determines its resilience. 

The ongoing struggles have forced the leadership team to try to right-size the business, as they seek to find $1 billion in selling, general, and administrative savings by the second quarter of this year. What's more, the main goal now is to get Carvana to positive free cash flow, welcome news for shareholders. 

Opportunity among the pessimism 

With shares down 97% from their peak, Carvana's stock currently trades at a price-to-sales ratio of 0.07, near the cheapest it has ever been. You could say the pessimism surrounding this business has never been higher. However, this could present investors with a potentially lucrative opportunity. 

As we've already seen this year, it doesn't take much for Carvana's stock to soar. Perhaps the market believes inflation is on its way down and the Federal Reserve will stop, or even reverse, its rate hikes later this year. Or maybe the market thinks management can deliver on its cost-cutting measures. This could be a positive development for a company like Carvana that, as we know, relies heavily on a favorable macroeconomic backdrop not only for its success, but for its survival. 

To be clear, just because Carvana shares have been beaten down so much, doesn't mean they are automatically due to rise again. This is no doubt a troubled business that is facing a reckoning of sorts, and it could very well find itself in bankruptcy court. The risk is certainly high. 

However, the reward is also huge. If the company can navigate the near-term headwinds by cutting expenses, conserving cash, and continuing to pay its high interest payments, then it's easy to see the financials once again return to the phenomenal growth rates we saw before 2022. After all, it's strikingly clear that Carvana's market opportunity is gigantic, as annual used car sales usually eclipse $1 trillion in the U.S.  

For those who understand and accept the risks and uncertainty surrounding Carvana right now, it's not difficult to see a situation where the stock doubles again, no matter how low the probability of this happening might be.