My ongoing case FOR Cavana

I am a Carvana stockholder, who first brought Carvana to the attention of this board back on 11/26/2018
CVNA TWLO top price & revenue gainers…

and, thereafter, posted quarterly and annual results.
CVNA Q4/FY 18 triple digit gains continue…
Carvana Q1’19 revenues up 110% YoY…

I’ll start my case for Carvana with PaulWBryant’s closing remark in his OP case against Carvana: PS - Valuation
I don’t see why a Carvana is valued at $10 billion. If you must invest in a company that will have a hard time making a net profit, check out Wayfair. They made $6.8b in revenue in 2018 (vs Carvana’s 2b), 1.6b in Gross Profit (vs Carvana’s 200m), and spent $2.1b on OpEx (still more than gross profit, but not nearly 200% of it). And they’re valued at about $14 billion.
That’s about $14 billion more than I would pay for Wayfair, but it’s weird how they have 8x the gross profit of Carvana and yet are just 40% more expensive.

First of all, I keep a file of Saul’s gem posts by category, from which I’ve drawn the following two posts that I highly respect and, whenever I can, try to comply with and acknowledge matters out of compliance, especially regarding a non-Saas/non-cloud company like Carvana.
• How I pick a company to invest in…
• My thoughts about the valuation of our companies…

This is why I open or include in my Carvana posts like my last one about Cavana’s Q1 2019 results with the following:
All the above by a company, acknowledged in my original Carvana post here on 11/26/18, that:
(a) is disrupting and transforming the retail used car sector with their company’s custom-built business model and e-Commerce platform.
(b) is not a software company with recurrent revenue,
(c) sells things, i.e., used cars,
(d) is capital intensive,
(e) has low gross margins akin to its automotive retail industry,
(f) has a low P/S of 1.09 and EV/Revenue of 4.74,
(g) continues aggressive expansion into new markets and expansion of its network of inspection and reconditioning centers (IRCs).

Here’s comparing Carvana with the following applicable thoughts by Saul on valuation on his companies.

First: A shameful admission. I don’t really look at P/S ratios and couldn’t tell you the P/S ratio’s of any of my companies. Why? Consider a supermarket company that has a maybe 3% margin and a software company that has a 95% margin. That means $100 million in sales is worth $3 million to the supermarket company and $95 million to the software company. How do you compare bare P/S ratios in any meaningful way?
My comments:
• Regarding gross margin, Carvana is definitely at the opposite end of SaaS/cloud software companies. Carvana’s gross margin, however, has grown significantly from 5.3% for FY2016 to 10.1% for FY2018 with a corporate long-term target goal of 15%-19%.

• Regarding P/S, I include and show above Carvana’s very low single digit P/S 1.09 (and EV/R 4.74), for P/S proponents here like PaulWBryant, who oddly (conveniently/on purpose?) failed to include and address this in his valuation comments, especially given that Carvana has realized 21 consecutive quarters of triple-digit revenue growth.

Second: Growth matters. My comments: In addition to 21 consecutive quarters of triple-digit revenue growth, Carvana realized 20 consecutive quarters of triple-digit growth in the number of retail used car units sold and this quarter “fell short” showing an increase of only 99%.

Sixth: Let’s look at sales and marketing expense. My comments: Carvana’s SG&A total as a % of revenue has decreased substantially from 29.8% for FY2016 to 14.9% for FY2018 with a corporate long-term target goal of 4.5%-5.5%.

Rather than waste my time making irrelevant useless comparisons with out-of-sector companies like Wayfair and Amazon, in my due diligence I continue to compare and analyze Carvana’s business model, operations, financial performance and corporate management with its largest competitors, e.g., CarMax, the largest retail used vehicle dealer in the U.S., and AutoNation, the nation’s largest retail vehicle dealer that sells both new and used vehicles.

PaulWBryant commented: I think SaintCroix mentioned 51% of Carvana shares were held short. If that’s correct, I can see why!

Here’s what I previously posted in response to Ant’s concern about short-sellers:

A recent 4/20/19 TMF article “Why Short-Sellers Are Wrong About Carvana: Shot selling this highly valued stock may seem like a good idea at first, but it’s way off base in the long run” by TMFCop Rich Duprey, that, BTW I agree with, might allay your concerns.…

Carvana (NYSE:CVNA) is the third-most-shorted stock on the NYSE, but there is no good reason for investors with an appropriate long-term investing horizon to worry.
Short story long
Short-sellers are likely shorting Carvana’s stock because its valuation has gotten well ahead of its performance. Where Carvana trades at 4.6 times its sales, CarMax goes for just a fraction of its sales at 0.7 times. Even Tesla, which moved to an online-only sales model last month but has also suffered a big hit for missing sales goals, trades for 2.1 times its sales.

According to The Wall Street Journal, over 21 million shares of Carvana stock were sold short. While that’s a 12% drop from the prior period, it still amounts to 56% of Carvana’s float, or the number of shares outstanding, which puts it third, behind only Yeti and Lannett.

However, that still means Carvana’s short interest ratio – the theoretical amount of time it would take short-sellers to cover their position – is 14 days. Anything over seven is considered a lot. Should Carvana’s earnings report beat expectations, or if any other good news alights on the used car dealer, short-sellers could get caught in a short squeeze and send Carvana’s stock soaring. It’s why shorting is a risky game to play.

It would seem those shorting Carvana’s stock believe the underlying business doesn’t yet justify the valuation. Although they could be right for the near term, the used car dealership still has plenty of room to scale up. Despite some wild-eyed goals for the future, Carvana may be a business you don’t want to bet against over the long haul.

Hope the above addresses the short concerns of yours and other readers here. I am very wary of articles written by short-sellers, especially like the one cited at SA.

Next, as a segue, here’s Saul’s response to GrowthMonkey’s question: When you invest in these high growth businesses, do you pay any attention to valuation? i.e. maximum P/E to P/S that you are willing to pay?

In Saul’s reply, I provide my comments in brackets and make emphasis in bold:
Saul: Actually, usually I don’t. I can’t figure PE’s as a lot of them don’t have earnings yet. And I rarely look at PS ratios. I’ve seen really smart people like Bert exit Square and Shopify at $30 plus and about $93 because he was watching “valuation,” and then had to buy them back $20 and $40 higher as I remember. What I do is look at the growth of the company,

• whether it seems to be a leader or disruptor in its space [Carvana is both a disrupter and e-business leader in its retail used car sector],

• whether its customers are happy (Net Promoter Score or Dollar-based Net Retention) [no NPS for Carvana, but triple-digit Y-o-Y growth and recent 99% Y-o-Y growth in retail used car units sold for 21 consecutive quarters infers popularity, ease and convenience of its online and mobile services*,*

• its TAM [Carvana’s TAM is huge],

• its moat [none},

its progress towards profitability, etc. [THIS IS THE SEGUE]

I figure that the power of compounded growth will take care of the rest.

Next, PaulWBryant’s “so simple” comments: This is so simple it will seem simplistic, but it’s really just the math.
In 2018, Carvana’s revenue was almost $2 billion. But gross profit was only about $200m. That’s a 10% Gross Margin.
To make that $200m of profit, they spent well over $400m in Operating Expenses. That’s right, OpEx was actually more than 200% of Gross Profit.
Unless something fundamentally changes, Carvana will simply lose more and more money as they “scale.” That’s not what I call scaling. With SaaS, this is exactly the opposite.
Carvana’s battle: because gross margin is so low, they will have to (eventually) try to keep OpEx down to eke out a tiny profit.

I find it absolutely necessary to reiterate from my previous posts and provide the approach taken by Carvana management regarding financial objectives and performance to achieve positive earnings.…


Excerpts from the latest Q1 2019 report:

Our management team focuses on delivering an exceptional and unparalleled customer experience while simultaneously growing the business rapidly and achieving our financial objectives. We firmly believe wowing the customer is the core of our model and drives all other metrics. To realize our long-term vision, our three primary financial objectives remain unchanged: (1) Grow Retail Units and Revenue; (2) Increase Total Gross Profit Per Unit; and (3) Demonstrate Operating Leverage. We believe continued focus on these goals will lead to a strong long-term financial model.

Long Term Financial Goals

Below we present our long-term financial model that we introduced at our Analyst Day on November 29, 2018. We believe this is the appropriate frame through which to evaluate our results and progress towards each of our financial objectives.

**Carvana (CVNA)	             FY 2016   FY 2017	        FY 2018	        Q1 2019	    TARGET**

**YOY Revenue Growth**	        180%	  135%	           128%	           110%	       -

**Gross Margin** 	                5.3%	  7.9%	    10.1%/10.3%	    11.7%/11.8%	   **15% - 19%**
(include Gift/exclude Gift)

**Advertising**	                7.4%      6.5%	           5.7%	           5.2%	 **1.0% - 1.5%**

**SG&A ex. Advertising & D&A**     21.1%	 18.2%	    14.9%/14.5%	    14.3%/14.0%	 **4.5% - 5.5%**
(include Gift/exclude Gift)					

**D & A**	                        1.3%	  1.3%	           1.2%	           1.1%	 **0.5% - 1.0%**

**SG&A Total as % of Revenue**     29.8%	 26.0%	    21.7%/21.3%	    20.6%/20.3%	   **6% - 8%**
(include Gift/exclude Gift)					

**Net Loss Margin**	             (25.5)%   (19.1)%  (13.0)%/(12.4)%	(10.9)%/(10.5)%	      -
(include Gift/exclude Gift)					

**EBITDA Margin** (exclude Gift) (23.2)%   (16.9)%	         (9.9)%	         (7.4)%	  **8% - 13.5%**

Objective #1: Grow Retail Units and Revenue

CVNA reported the following:

We grew units and revenue significantly again in Q1. Retail units sold increased to 36,766, up 99% from 18,464 in the prior year period. Revenue in Q1 grew to $755.2 million, up 110% from $360.4 million in Q1 2018. Our growth in the first quarter was broad-based, driven by gains across our markets nationwide. The 2019 cohort continued the historical trend of new cohorts ramping faster than previous cohorts.

Buying Cars from Customers
We sourced substantially more cars from our customers in Q1 than in any previous quarter, aided by our first TV advertising campaign that highlights Carvana’s offer of buying cars from customers. We are actively enhancing and developing the customer experience for selling a vehicle to Carvana and believe this remains one of our business’s largest opportunities.
Total vehicles acquired from customers grew by 232% in Q1 2019 vs. Q1 2018, meaning that we bought 40% as many cars from our customers as we sold in the first quarter, up from 24% in Q1 2018 and 36% last quarter. The industry leader in our market buys approximately 100% as many cars as they sell, illustrating the huge potential in this business. Wholesale units sold, which are primarily sourced from customers, increased by 186% to 6,701 in Q1 2019 from 2,342 in Q1 2018. Retail units sold sourced from customers increased to about 14% from about 6% in Q1 2018. This was lower than the 17% in Q4 due to the expected rapid growth in auction-sourced inventory in preparation for Q1 2019.
These powerful results reflect the quality of the customer experience we offer, which to date has resulted in even higher NPS scores than our retail business.

Objective #2: Increase Total Gross Profit Per Unit (GPU)

The following are Carvana excerpts:

We achieved another strong quarter of total GPU growth in Q1, demonstrating additional progress toward our $3,000 midterm goal. Items “including Gift” reflect the impact of the compensation expense related to the 100k Milestone Gift to employees, in accordance with GAAP. Ex-Gift items exclude the compensation expense impact of the 100k Milestone Gift to employees and are non-GAAP metrics.

For Q1 2019:

• Total
o Total GPU (incl.Gift): $2,408 vs. $1,854 in Q1 2018
o Total GPU ex-Gift: $2,429 vs. $1,854 in Q1 2018

• Retail
o Retail GPU (incl.Gift): $1,282 vs. $902 in Q1 2018
o Retail GPU ex-Gift: $1,302 vs. $902 in Q1 2018
o Gains in Retail GPU were primarily driven by market conditions, as the prior first quarter was impacted by Hurricane Harvey, incremental shipping revenue, and a reduction in average days to sale to 63 from 70.

• Wholesale
o Wholesale GPU (incl.Gift) was $83 vs.$73 in Q1 2018
o Wholesale GPU ex-Gift was $83 vs. $73 in Q1 2018
o Changes in Wholesale GPU were driven by higher wholesale unit volume (+186%) relative to retail units (+99%), partially offset by lower gross profit per wholesale unit sold ($453 incl. Gift and $456 ex-Gift vs. $579 in Q1 2018).

• Other
o Other GPU was $1,044 vs. $879 in Q1 2018
o Gains in Other GPU were driven by improvement in loan monetization from our inaugural auto loan securitization. Total finance GPU, including gain on loan sale and interest income net of securitization fees and expenses, was $625 in Q1 compared to $561 in Q1 2018. Additional GPU gains were primarily driven by higher attachment of VSC and GAP waiver coverage.

Objective #3: Demonstrate Operating Leverage

The following are Carvana excerpts:

We demonstrated meaningful operating leverage again in Q1 2019 as Net Loss margin incl. Gift levered by 3.7% and EBITDA margin ex-Gift levered by 4.9%, reaching record levels for both metrics. We expect to make additional progress toward our long-term SG&A goals over the remainder of 2019.

For Q1 2019:

Total SG&A levered by 2.5% incl. Gift and 2.8% ex-Gift, primarily reflecting increased cohort advertising leverage and benefits from scale
• Compensation and benefits levered by 0.2% incl. Gift and 0.5% ex-Gift, primarily reflecting benefits from scale
• Advertising levered by 1.7%, reflecting leverage in existing markets, shifting mix towards older markets, and benefits of lower initial CACs in the 2019 cohort.
• Logistics and market occupancy was levered by 0.2%, reflecting improving efficiency and volumes through our fulfillment network.
• Other SG&A levered by 0.4%, primarily reflecting benefits from scale.

For the full year 2019, we expect to significantly improve our EBITDA margin ex-Gift as the underlying leverage in our cohorts continues to become more visible at the corporate level.



Carvana margins demand investor vigilance. So far, during its ongoing growth and expansion phase, Carvana is realizing fiscally positive improvements in all three margins.

In the Carvana Long Term Financial Goals, management set forth a long term target of 15% to 19% for Gross Margin.


Q1 ’19  11.7%      (10.9%)      (3.8%)

FY '18	10.1%	   (11.7%)	(3.2%)

Q4 '18   9.6%      (12.7%)      (4.9%)
Q3 '18	10.7%      (10.9%) 	(2.9%)	
Q2 ‘18	10.3%	    (9.8%)	(2.1%)
Q1 ‘18	 9.5%	   (13.6%)	(2.0%)
FY '17	 7.9%	   (18.1%)	(7.3%)
Q4 ‘17	 8.3%	   (17.0%)     (18.9%)
Q3 ‘17	 9.1%	   (17.0%)	(1.9%)
Q2 ‘17	 7.7%	   (17.2%)	(7.0%)
Q1 ‘17			
FY '16	 5.3%	   (24.5%)     (25.5%)


First Auto Loan Securitization, Public Offering of Class A common stock and Additional Senior Notes

On 5/8/19 at the Carvana Q1 2019 earning call, Ernie Garcia III made the following comments about completion of their first auto loan securitization, marking a major step forward in monetizing their finance platform:
In the first quarter, we also completed our first securitization. This is a significant accomplishment that required a lot of work and preparation. All the hurdles clear, the deal was completed laying out a template for similar deals in the future and lighting the path for significant progress in the finance contribution to our total GPU. The calculations we have done historically to determine we believe is ultimately achievable for our finance program simply rely on the way other mature issuers in the market are executing similar transaction today. So in a sense, completing our securitization doesn’t really impact our view of where we’re headed at all. That said, it does mark a significant milestone and provides with a nice empirical datapoint with our own loans that cements our view of what is possible. We also did continue to make exciting progress in our business of buying cars from our customers where we grew units by 230% year-over-year, which now represents us buying 40% cars from our customers that we are selling. The experience we offer our customers when we buy a car from them is very simple, They got a, get a value, pick a time for us to pick up their car and we put money in their account. That customer facing simplicity requires complex technology and operations capabilities in the background. And we’re very excited to see it generating the same kinds of reviews from our customers that we’ve seen on the retail side of the business, which we expect to fuel the same kind of explosive growth.

On 5/20/19, Carvana announced that it has commenced a public offering of its Class A common stock. Carvana is proposing to sell 3,500,000 shares of Class A common stock and expects to grant the underwriters the right to purchase up to 525,000 additional shares of Class A common stock.
Concurrently with the proposed public offering of Class A common stock, Carvana is offering, subject to market conditions and other factors, $250.0 million of additional 8.875% senior notes due 2023 (the “new notes”) in a private offering. The new notes will be issued as additional notes under the indenture governing the outstanding $350.0 million in aggregate principal amount of Carvana’s 8.875% senior notes due 2023 that were issued on September 21, 2018.
Carvana intends to use the net proceeds from the public offering of Class A common stock and the new notes offering for general corporate purposes.……

On 5/21/19 Moody’s affirmed Carvana’s B3 CFR and Caa2 senior unsecured rating. Moody’s Vice President Charlie O’Shea stated, ”Carvana is progressing with its growth plans, and results are generally in-line with our expectations,"…

As of March 2019 (mrq), Carvana’s debt-to-equity is 16.96. (equals [$405.1908 M in Current Portion of LT debt + $479.039 M in LT Debt & Capital Lease Obligations] divided by $54.773 Total Stockholders Equity).

In my ongoing due diligence and vigilance, I intend to fully analyze the impact of these recent developments.


I need to set straight an absolutely terrible wrong reply in the case against Carvana thread by poster 12x as to who is in-charge at Carvana. There are two Ernie Garcias. EG II, the head of DriveTime, does not run Carvana. His son, EG III, does as Board Chairman, President and CEO and is not “milking” shareholders. In fact, in recognition of Carvana selling its 100,000th vehicle, CEO Ernie Garcia III recently committed to give each current employee 165 shares of his personal stock once they reach their one-year employment anniversary, a gift worth up to $35 million at the announcement date’s stock price.

Here’s what I stated about corporate management in my first Carvana post bsvk on 11/26/2018:

In 2012, Carvana was co-founded by Ernie Garcia, III (Board Chairman, President & CEO), Benjamin Huston (Chief Operating Officer) and Ryan Keeton (Chief Brand Officer) with headquarters in Tempe, Arizona. Carvana’s top executive management team is relatively young, well-educated (primarily Stanford and/or Harvard), experienced and focused on disrupting and transforming the retail used car sector with their company’s custom-built business model and e-Commerce platform.

At present, the insider ownership is 21.41% with major shareholder Ernest C. Garcia II (the father of CEO Ernie Garcia III) holding 52,937,458 shares. Ernest Garcia II is a self-made billionaire (rank #127 on Forbes list of 400 of the the Wealthiest Americans with a real time net worth of $3.8 billion; update as of 5/21/19, ranked #691 worth $5.7 billion ), who currently owns and runs DriveTime Automotive, the nation’s 4th biggest used car retailer.…
[Here is some full-disclosure background about Ernest Garcia II’s remarkable rebound from failure to a self-made billionaire. In October 1990, Garcia, then a Tucson-based real estate developer pleaded guilty to bank fraud, following the failure of Charles Keating’s Lincoln Savings and Loan Association. Garcia "fraudulently obtained a $30-million line of credit in a series of transactions that also helped Lincoln hide its ownership in risky desert Arizona land from regulators.” Garcia spent three years on probation, and he and his firm filed for bankruptcy. In 1991, he bought Ugly Duckling, a bankrupt rent-a-car franchise, for under $1 million and merged it with his own fledgling finance company, and turned it into a company selling and financing used cars for sub-prime buyers with poor credit history. Fast forward 27 years, he’s now the nation’s 4th largest used car retailer. In 2002, the Ugly Duckling name was changed to DriveTime Automotive.]

Carvana was founded by Garcia’s son, Ernie Garcia III, as a subsidiary of DriveTime Automotive and was later spun out. This explains why Carvana, a Tempe, Arizona based company, chose Atlanta, Georgia as its first market to target and penetrate.


Some posters in the case against Carvana thread and others seem to think that Carvana is a run-of-the-mill used car dealership. No. No. In my deep dive due diligence, I like to look behind the operations scene to find out what makes Carvana tick. Given its unique business model and e-Commerce platform of selling and distributing vehicles nationwide that is disrupting the industry, I was not surprised at all to find that CEO Ernie Garcia III and his corporate leadership team had deployed cutting-edge technology and IT infrastructure.

In 2016 when Imran Kazi joined the team as Carvana’s senior director of technology services, he found Carvana’s applications and data still residing in the former parent’s data centers. Instead of building Carvana’s IT from scratch, Kazi decided to build a hybrid infrastructure that would deliver flexibility for the company and took the following actions:

• Migrated customer-facing and business applications, such as customer relationship management and enterprise resource planning software, across several cloud providers, including Microsoft Azure.

• Adopted SaaS offerings: RingCentral for unified communications and Google G Suite for email and collaboration.

• Chose the commercial cloud for three primary benefits: (1) it saves money; (2) it provides the company the agility it needs for growth; and (3) instead of having to manage infrastructure in the production environment, the cloud frees up IT staff for more strategic needs.

• Built a private cloud across two data centers using Nutanix’s HCI appliances, which combine servers, storage, networking and virtualization into a small-footprint appliance.
These unified systems, which run on Nutanix’s license-free AHV hypervisor, are more energy efficient, easier to ­manage and easier to scale than traditional hardware. If the environment reaches capacity, Kazi can purchase new appliances and quickly configure them with Nutanix’s management software. Katz stated, “We can easily expand as we grow and have more projects.”

Since Kazi’s arrival, Carvana has grown rapidly nationwide, expanding from 11 cities to 109. It runs about 350 virtual machines across 25 clusters of Nutanix appliances. Data scientists, ­analysts and developers use them as a test and staging area for new applications and algorithms. The company uses analytics to understand customer preferences, discover new markets to enter and drive logistical efficiencies.

Through the private cloud, employees can fully test out applications and algorithms before deploying them in production in the public cloud. Having full control of in-house infrastructure aids that effort.
Kazi stated, “We can understand every nuance of the software and what resources it takes, and then we figure out the best cloud platform to put it into production.”

The company also installs a Nutanix appliance in each of its car inspection centers, where 360-degree photo ­technology takes data-intensive pictures of the cars. “We need the infrastructure locally to upload the photos to the cloud,” Kazi says.

Carvana moved away from an expensive and limited capability hardware-based legacy PBX system and chose RingCentral because the company wanted a single integrated collaborative communications solution that would scale easily as the business grows. RingCentral provides Carvana with an easy to manage solution that enables its IT department to work smarter, not harder, by utilizing the power of the cloud.
RingCentral will be used by employees at the Carvana headquarters, retail locations across the US, and will be used extensively by Carvana’s External Advocate team. Prior to RingCentral, these External Advocates had to use personal cell phone numbers when delivering cars, but now they will use their business numbers on their personal mobile devices when communicating with customers. RingCentral is also helping Carvana improve its customer experience through robust administrative controls and call analytics, which provides real-time visibility into call times and number of customers on hold. This will allow Carvana to identify areas in its customer communications that need improvement.
Carvana also selected RingCentral for its integrations with Salesforce and Okta. Salesforce is used by Carvana’s Advocate team to manage customer relationships. The integration creates an unparalleled experience for making or receiving calls through RingCentral, directly from within Salesforce. Also, RingCentral’s integration with Okta allows Carvana employees to use Single Sign-on to securely access RingCentral anytime, anywhere, and from any device.

I could go on, but I think now everyone gets the message that Carvana is not a run-of-the mill used car dealership.



For now, I intend to stick with Carvana management’s objectives and Long-Term financial goals, vigilantly watch their execution and progress and keep my Carvana investment.

Equally gratifying is Carvana’s ongoing kick-ass stock price performance as of 5/8/2019 the date of my post:
• up 119% year-to-date
• up 184% over the recent past 52-week period.

Here’s the latest Y-T-D Big Chart showing Carvana substantially out-performing some of my favorite holdings, i.e., AMRN, TWLO, ZS and MDB.

And the latest Big Chart 52-week performance by CVNA and the other aforementioned companies.

I’m remaining a Carvana investor, rejecting PaulWBryant’s “Jonestown” Kool-Aid offering.

As always conduct your own due diligence and decision-making.



Awesome response! Thanks!


1 Like

How do you get P/S of 1.09 for Carvana? Carvana’s market cap is 9.94 billion and they had fy 2018 revenue of 1.96 billion. Isn’t that closer to a p/s of 4?…

1 Like

BobbyBe: How do you get P/S of 1.09 …. Isn’t that closer to a p/s of 4?

Many years ago I ran into the same enigma that was resolved when I learned that there were two ways to calculate P/S ratios that may not match. Take a look at this website.…

You’ll find that you are using the easiest and quickest way, i.e., Market Cap divided by Revenue (ttm/trailing twelve months)

The following financial websites use this method.

Finvis shows        P/S 4.11 = Market Cap 9.65 B / Revenue (ttm) 2.35 B
Yahoo Finance shows P/S 4.25 = Market Cap   10 B / Revenue (ttm) 2.35 B


The 1.09 P/S in my post uses the other formula that requires more effort to calculate.

P/S = current stock price / Revenue per share (ttm)

Revenue per share has to be calculated for each of the recent past 4 quarters.

Revenue per share = Quarterly Revenue / Shares outstanding (diluted)

For Quarter ending March 2019
Revenue 755.234 / Shares outstanding (diluted) 41.352 = 18.264 Revenue per share

Quarterly Revenue per share
18.264 (MAR 19)
14.847 (DEC 18)
15.436 (SEP 18)
17.109 (JUN 18)        
65.656 Revenue per share (ttm)

For today 5/22/19 Carvana stock price closed at 65.11

Stock price 65.11 / Revenue per share (ttm) 65.656. = P/S 0.991

YCHARTS website shows 0.9915
Macrotrends website shows 0.91

For Carvana today, the two formula yield a range from 0.99 to 4.11 for P/S.

Rather than wrestle with which one is best, perhaps both provide “good enough” ball park figures, since an exact number is not critical for P/S.

If I may suggest, use the P/S ratio already calculated and available at your choice of financial websites.



Hi Ray,

Nice post.

I continue to compare and analyze Carvana’s business model, operations, financial performance and corporate management with its largest competitors, e.g., CarMax, the largest retail used vehicle dealer in the U.S., and AutoNation, the nation’s largest retail vehicle dealer that sells both new and used vehicles.

CarMax had $19 billion in revenues last year.

The worldwide auto market is $4,000,000,000,000.

Basically they are 1/2 of 1 percent of the world market.

Tiny, tiny, tiny fish.

I think people are underestimating how big a trillion dollars is (let alone four of them).

The auto market is huge, and extremely disaggregated.

I have an unshakable belief that virtual companies have strong inherent advantages to their brick-and-mortar counterparts. That’s been proven over and over again. You want to talk about a waste of time? Comparing the virtues of internet retail to bricks-and-mortar is a waste of time. Of course the internet is superior. Of course it’s a stronger value proposition. Of course the margins are better, and it’s easier to scale. Of course competition is narrowed, and the company with the largest mindshare and brand dominates the game.

Carvana is not competing against one tiny merchant. They are competing against thousands and thousands of them. I don’t know how much of auto retail Carvana can ultimately grab. But it’s a hell of a lot bigger than one half of one percent.

1 Like

Many years ago I ran into the same enigma that was resolved when I learned that there were two ways to calculate P/S ratios that may not match.

The two methods you describe should not give results that differ greatly, like this case.
I don’t think the P/S of 4.11 is correct. I think that must be EV/S which is adding debt, but that’s unconfirmed.

Here’s why these methods shouldn’t be that different assuming dilution doesn’t run wild or buybacks don’t have a huge impact.

The only difference in the math is the share count used. With the quarterly calculation, you are using each quarter’s ending share count. With a standard P/S calculation, you are typically using the current shares outstanding.

P/S = Market Cap/TTM Rev
Market Cap = Stock Price x Shares Outstanding

Putting the P/S ratio in terms of stock price divided by TTM revenues per share is the exact same thing, except for the iterative style over every quarter comes up with a slightly different share count basis.


1 Like

For Quarter ending March 2019
Revenue 755.234 / Shares outstanding (diluted) 41.352 = 18.264 Revenue per share


The confusion about the PS ratio is not due to your method, it’s due to the share count you’re using.

At 41.4 million shares, which is the correct GAAP total, Carvana would have a market cap of $2.7 billion.

However, non-GAAP, there are 150.3 million shares. So Carvana is really a $9.8 billion company.

This is obviously quite a big deal, and you should know the difference if you hold shares.



imuafool I don’t think the P/S calculation is accurate. You are using diluted A shares only, when there are also 100m+ shares of B stock. Otherwise, using your diluted share number, the market cap would be 1/4 of the current ~$10B ($65 * 41m). This explains the variance between the 4 P/S and 1 P/S you are calculating

From the Company’s 10Q for March 2019, footnote 13:
Shares of Class B common stock do not share in the losses of the Company and are therefore not participating securities.

I’m sure this is GAAP compliant (a little light reading seems to indicate different ownership structures with class B shareholders being considered a VIE) but to me at least highly misleading - think we have discussed on the board at length about GAAP vs economic reality

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Shares of Class B common stock do not share in the losses of the Company and are therefore not participating securities.

Why would anyone want to own losing shares when insiders own the winning shares? Lunacy!

It’s bad enough when B shares have ten times the vote.

Can anyone explain?

Denny Schlesinger