Critical Review: Carvana (CVNA) & America’s Car-Mart (CRMT)

America’s Car-Mart (NASDAQ: CRMT) and Carvana (NYSE:CVNA) are both retail/wholesale companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, risk, institutional ownership, valuation, dividends and earnings.

Valuation & Earnings

This table compares America’s Car-Mart and Carvana’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
America’s Car-Mart $587.75 million 0.55 $20.20 million $2.70 16.72
Carvana $365.14 million 7.95 -$93.11 million N/A N/A

America’s Car-Mart has higher revenue and earnings than Carvana.

Profitability

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

Net Margins Return on Equity Return on Assets
America’s Car-Mart 3.58% 9.18% 4.94%
Carvana -17.65% -59.15% -32.55%

Analyst Recommendations

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
America’s Car-Mart 0 2 0 0 2.00
Carvana 1 4 9 0 2.57

America’s Car-Mart presently has a consensus price target of $43.50, indicating a potential downside of 3.65%. Carvana has a consensus price target of $20.21, indicating a potential downside of 7.60%. Given America’s Car-Mart’s higher probable upside, equities research analysts plainly believe America’s Car-Mart is more favorable than Carvana.

Institutional and Insider Ownership

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

Summary

America’s Car-Mart beats Carvana on 8 of the 11 factors compared between the two stocks.

America’s Car-Mart Company Profile

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.

Carvana Company Profile

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.

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