Carvana (CVNA 0.35%) shares have been on an absolute tear this year, up over 700% so far. Despite a renewed sense of optimism surrounding the most speculative of growth tech stocks, this company has benefited from a new debt deal that should ease the company's financial stress in the near term. 

But investors need to understand that this is still a very risky company. There's a lot of uncertainty as it relates to Carvana's long-term future. 

However, if we assume that this used car retailer can continue improving its financial position and return to outsized growth again, where could the stock be in three years? Continue reading to see what I think about Carvana's prospects. 

Taking market share 

This stock was such a huge winner years ago because investors understood that the business has massive potential. The used car industry is so big and fragmented, while also prone to being disrupted, that Carvana's improved customer experience and e-commerce focus has lots of potential upside. 

To be fair, growth has slowed recently in the face of macro headwinds, mainly due to higher interest rates and elevated inflation, that discourage people from looking to buy cars. In the latest quarter (Q2 2023 ended June 30), retail units sold and revenue declined 35% and 24%, respectively, compared to the year-ago period. This is in stark contrast to the monster gains Carvana was registering prior to 2022. 

The U.S. economy spends the vast majority of its time in expansion mode compared to being in a downturn. For a macro-sensitive business like Carvana, that's a reason to be optimistic. Should the economy get back on stronger footing sooner rather than later, and demand for used cars pick up, Carvana is in a good position to benefit. 

Sustainable profits 

Earlier-stage tech stocks have long gotten away with foregoing profits today in the name of growth. Carvana was no exception. But in the context of the current economic backdrop, investors are craving improved financials. Carvana will save $455 million in interest payments in each of the next two years as part of the recent debt restructuring -- and that should help somewhat. 

Management has also embarked on major cost-cutting measures to drive greater operational efficiency in order to get the business on a sustainable financial path. This is already paying off, as the net loss totaled $105 million last quarter, a notable improvement from a $439 million loss a year ago. Additionally, the leadership team hopes that for the just-ended third quarter, Carvana can achieve positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the second straight three-month period. 

In the next three years, if the company can show that it's making great strides further down its income statement, proving that it's on a clear path to reaching positive net income, investors will certainly have a lot to get excited about. 

Higher valuation 

Returning to rapid unit and revenue growth, while also getting closer to profitability, will undoubtedly lead to strong stock returns, in my opinion. That's because the current valuation indicates that there is a ton of pessimism still present, with shares trading at a price-to-sales (P/S) multiple of 0.4. This represents a substantial discount to the historical average of about 1.1. 

So if in three years, Carvana's P/S ratio gets back to that average, the stock will triple. This is only from a valuation perspective. If those previously mentioned fundamental factors also start to improve drastically, then it's not hard to envision this stock rising even more. But as I said before, Carvana remains a risky investment, even though the upside could be huge.