After a gut-wrenching 98% drop in 2022, shares of Carvana (CVNA -0.17%) have bounced back tremendously this year, up over 900%. This performance is on the back of the 31% gain of the Nasdaq Composite, which has entered bull-market territory following a huge decline last year. 

Boosting Carvana's stock was management's ability to restructure debt by extending maturities and substantially reducing interest payments this year and next. It looks like investors believe that the used car retailer has avoided filing for bankruptcy. 

But to be completely clear, Carvana is still an extremely risky business to own right now. There is a lot of uncertainty not only in the near term as it relates to the macroeconomic environment, but over the long term, with the company's ultimate success still in question. 

If that reality still doesn't scare you away, there are two compelling reasons to buy shares. Those interested in the most speculative growth tech stocks might be intrigued. 

Massive market 

One of the most obvious reasons to own shares has to do with the size of the domestic used-car industry. In 2021, 41 million vehicle transactions occurred, with a value of close to $900 billion. This is one of the largest retail markets across the broader economy. 

The industry is also extremely fragmented. The top-100 used car retailers command just 11% of the overall market. This means that there is ample opportunity for Carvana to grow its market share. 

For comparison's sake, in the home improvement industry, Home Depot, the biggest player, has 17% of the market. Dick's Sporting Goods, the leading athletic apparel and equipment retailer, has 14% share in its industry. It's anyone's guess what Carvana's ultimate market penetration will be. But if it can one day reach 10% of the used car industry, that would translate to a roughly tenfold rise in the company's annual unit volume over the 412,000 cars it sold in 2022. 

The insanely large addressable market that is sitting in front of Carvana is certainly why investors bid up shares over 3,200% between its initial public offering in April 2017 and its all-time high in August 2021. At that point, Carvana's market capitalization was more than $30 billion, which was indicative of the huge amount of optimism being priced in.

That optimism was understandable. Carvana has created a superior customer experience in an outdated industry that is known for being a huge pain for car shoppers. If you're in the market for a used car, instead of going to a brick-and-mortar dealership that might have a limited inventory, an unpleasant salesperson, and a burdensome process, customers can go to Carvana's website, view thousands of options, and buy a car all in a few minutes. The car can be delivered to your house, and there's even a seven-day return policy. 

Low valuation 

A huge addressable market, coupled with a better customer experience, shows that Carvana has meaningful potential. But since the stock is currently 87% below its peak price, there is added upside for shareholders. Despite crushing the market this year, the beaten-down stock trades at a price-to-sales (P/S) multiple of 0.4 right now. Since going public, Carvana's average P/S ratio is 1.1. So clearly, the stock is incredibly cheap from a historical perspective. All else equal, a lower valuation means that the potential gains for investors are bigger. 

To be fair, Carvana has notable issues, with the most pressing being the company's troublesome financial situation. The problems have been exacerbated by unfavorable macro conditions. But for investors who believe that Carvana can get back to registering strong growth, while inching closer to profitability, it might be time to buy the stock.