Carvana (CVNA +0.35%) stock's rebound has been nothing short of astounding. After a brutal collapse in 2022 that led to shares hitting a low of $3.55, the used-car seller has made a remarkable comeback. Today, shares trade at close to $470. While much of this gain occurred before 2025, last year was still spectacular. Shares more than doubled in 2025, and they have continued to rise so far in early 2026.
Much of the stock's soaring price since its 2022 lows has been well-deserved. The company has executed an impressive turnaround, and its business is performing better than ever. But has the stock's rise outpaced the underlying fundamentals?
Let's take a look.
Image source: Carvana.
A turnaround built on growth and profits
Carvana sells used cars online, and it handles a lot of the process itself -- buying inventory, reconditioning cars, arranging financing for buyers, and delivering vehicles. Of course, it also specializes in a seamless virtual shopping experience. By vertically integrating a significant portion of the process and focusing on an e-commerce experience rather than a brick-and-mortar one, profits can soar when things go well.
This is exactly what has happened recently.
In Q3, Carvana sold 155,941 retail units, up 44% from a year earlier, and revenue rose 55% to about $5.65 billion. The company paired that growth with profitability, reporting net income of $263 million (up 78% year over year) and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $637 million (up 48% year over year).
Management also signaled that the momentum was continuing into the end of the year. In its Q3 update, Carvana said it expected to sell more than 150,000 retail units in the fourth quarter and adjusted EBITDA for the full year of 2025 to be at or above the high end of its previous forecast of $2.0 billion to $2.2 billion.
"In Q3, Carvana once again drove industry-leading growth and profitability," said Carvana CEO Ernie Garcia in the company's third-quarter earnings release. "We continue to focus on unlocking the structural advantages of our vertically integrated model that strengthen our business and separate our customer offering."
Why the stock looks stretched
Carvana has rebuilt itself into a profitable growth story, and the stock has responded.
Shares rose about 108% in 2025 and were up more than 11% year to date as of this writing.
But those same gains are the reason investors should slow down today. When a stock runs this far this fast, the question is no longer whether the business is improving. Instead, the question is how much improvement is already baked into the price.
One way to assess this is to look at earnings per share in relation to the stock's price. With a price of about $470 as of this writing, shares trade at a price-to-earnings ratio of 105. This means investors are paying $105 for every dollar of profits. And even when you take the company's forward price-to-earnings, which measures the stock's price as a multiple of analysts' average consensus for Carvana's earnings per share over the next 12 months, it's still incredibly high at 68.
NYSE: CVNA
Key Data Points
A valuation like this leaves the stock vulnerable to a significant decline if something unexpected happens, whether it's a company-specific issue, an industrywide problem, or a macroeconomic event. In short, a high multiple like this means there's valuation risk; any unexpected weakness could spook investors, and shares could fall sharply.
Overall, Carvana is doing a lot right. But at its current valuation, the stock price leaves little room for error. For these reasons, I think the stock is overvalued, and investors interested in buying shares should consider waiting for a pullback. Of course, given how well the company is executing, investors can't rule out the possibility of the underlying business doing even better than expected, and a pullback to attractive levels never occurring. But given how much is priced into the stock, I think the risk of missing out is one worth taking, with patience being the better choice here.
