Analyzing Carvana (CVNA) & America’s Car-Mart (CRMT)

Carvana (NYSE: CVNA) and America’s Car-Mart (NASDAQ:CRMT) are both cyclical consumer goods & services companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, dividends, valuation, institutional ownership, profitability, risk and analyst recommendations.

Profitability

This table compares Carvana and America’s Car-Mart’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Carvana -11.81% -153.67% -19.89%
America’s Car-Mart 3.58% 9.09% 4.98%

Institutional and Insider Ownership

15.2% of Carvana shares are held by institutional investors. Comparatively, 83.9% of America’s Car-Mart shares are held by institutional investors. 11.7% of America’s Car-Mart shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Carvana and America’s Car-Mart’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Carvana $365.14 million 8.00 -$93.11 million ($1.28) -17.20
America’s Car-Mart $587.75 million 0.56 $20.20 million $2.70 16.94

America’s Car-Mart has higher revenue and earnings than Carvana. Carvana is trading at a lower price-to-earnings ratio than America’s Car-Mart, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations and price targets for Carvana and America’s Car-Mart, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Carvana 1 3 10 0 2.64
America’s Car-Mart 0 2 0 0 2.00

Carvana presently has a consensus target price of $20.08, suggesting a potential downside of 8.80%. America’s Car-Mart has a consensus target price of $43.50, suggesting a potential downside of 4.92%. Given America’s Car-Mart’s higher probable upside, analysts plainly believe America’s Car-Mart is more favorable than Carvana.

Summary

America’s Car-Mart beats Carvana on 9 of the 12 factors compared between the two stocks.

About Carvana

Carvana Co. is an e-commerce platform for buying used cars. On the Company’s platform, consumers can research and identify a vehicle, inspect it using its proprietary 360-degree vehicle imaging technology, obtain financing and warranty coverage, purchase the vehicle and schedule delivery or pick-up, all from their desktop or mobile devices. The Company’s transaction technologies and online platform transform a traditionally time consuming process by allowing customers to secure financing, complete a purchase and schedule delivery online.

About America’s Car-Mart

America’s Car-Mart, Inc. is an automotive retailer focused on the integrated auto sales and finance segment of the used car market. The Company conducts its operations through its two operating subsidiaries, America’s Car Mart, Inc. (Car-Mart of Arkansas) and Colonial Auto Finance, Inc. (Colonial) (Collectively, Car-Mart of Arkansas and Colonial are referred to as Car-Mart). It primarily sells older model used vehicles and provides financing for all of its customers. As of April 30, 2016, the Company operated 143 dealerships located primarily in small cities throughout the South-Central United States. Dealerships are operated on a decentralized basis. Each dealership is responsible for buying (with the assistance of a corporate office buyer) and selling vehicles, making credit decisions, and servicing and collecting the installment contracts it originates. Dealerships also maintain their own records and make daily deposits. The Company has both regular and satellite dealerships.

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