Is It Too Late to Buy Carvana Stock?

The next time you look up " volatility " in a dictionary, you might be met by a Carvana (NYSE: CVNA) logo.

I'm kidding, of course, but the car-buying, vending-machine operator really is a paragon of extreme volatility.

The most erratic member of the S&P 500 (SNPINDEX: ^GSPC) market index (where Carvana doesn't have a seat) is oil and gas explorer APA Corporation with a beta value of 3.26. The next four names on that list of highly unpredictable stocks are casinos and cruise lines. Carvana has them all beat with a 3.43 beta.

That means Carvana's stock tends to move in the same direction as the broader stock market, but each jump or dip is about 3.43 times as large as the S&P 500's. When the market is down, Carvana dips even lower. And when Wall Street is doing fine, Carvana's stock tends to soar.

I'm looking at one of those extreme swings right now. Carvana's shares are exploring fresh, 52-week highs right now, up from a deep dive in the inflation crisis of 2022.

And it is indeed a soaring peak. Going beyond the S&P 500, there are 880 stocks on the American market with market caps larger than $9 billion. Carvana is smoking that entire field with a 518% gain from its annual lows. In second place on that list, you'll find Bitcoin (CRYPTO: BTC) buyer MicroStrategy (NASDAQ: MSTR) at a 353% rebound from recent lows.

Carvana makes an extra-risky Bitcoin investment look relatively calm. That's either impressive or terrifying, depending on how you feel about making risky investments .

So Carvana is soaring sky-high right now. Is it too late to buy the stock or does this chart have room to run even higher?

Carvana's historical stock highs

As one might expect from an ultravolatile stock like Carvana, the current yearly-price top is nowhere near the stock's all-time highs. That would be $370 per share, recorded in August 2021. Today's price stands 57% below that record reading.

So Carvana's stock has a history of reaching nosebleed valuations when times are good. But does it have enough fuel to get back there again?

The recent gains were hard-won. Carvana's revenue growth didn't just slow down in 2022; it turned negative for several quarters. The company also posted negative free cash flows in every quarter from its 2016 initial public offering (IPO) to the spring of 2023. The cash burn intensified as the stock chart crumbled in 2022. The company made it through that cash crunch by taking on more debt -- in an environment of rising interest rates.

That trial by fire is the reason why Carvana's stock has been so jumpy in recent years.

Carvana's current status: Fresh growth and positive profits

The company is doing better nowadays. Carvana reported bottom-line profits in three of the last four quarters, and the stalled revenue line is pointing back up again. Wall Street analysts hold overwhelmingly bullish opinions of this stock now, with 10 out of 14 firms calling it a "buy" or better.

Now, Carvana's stock used to be a stone-cold bargain trading at 0.03 times sales near the end of 2022. That valuation ratio is up to 2.5 now, far removed from the earlier pricing which tends to be reserved for businesses on the brink of bankruptcy. With solid earnings, refueled sales growth, and robust cash flows, Carvana appears to have exited that risky category.

It should be said that used car prices and vehicle sales volumes are coming down from the record highs they saw in 2021, just a couple of months after Carvana's stock chart turned sour. The used car market is normalizing after a COVID-19-inspired boom. Carvana's management is adjusting to this reconfigured market, which also is leaning away from old-school internal combustion vehicles in favor of electric cars.

It's a lot to take in, and Carvana has mismanaged the market's sea changes before.

Yet, the company looks quite robust nowadays. Carvana is consistently profitable in 2024, with the most glaring asterisk being a large and expensive debt load. Interest expenses soared to $664 million in the last four quarters, up from $176 million for the 2021 fiscal year. Even so, the company is generating enough profits to start paying down that irksome debt balance.

Is Carvana stock a buy now?

Where does that put Carvana on the spectrum from "busted comeback" to "surefire turnaround?" Somewhere near the middle, I think -- the company has a lot left to prove.

So Carvana isn't my favorite growth stock to buy today , but I do expect its jumpy stock chart to calm down as the company continues to improve its operations and wrestles down the mountain of debt papers. Any other growth stock trading at 2.5 times sales would be a screaming buy in my book, and maybe Carvana will get there, too. For now, I recommend staying on the sidelines for a while. This turnaround story could still go wrong in many ways.

Anders Bylund has positions in Bitcoin. The Motley Fool has positions in and recommends Apa and Bitcoin. The Motley Fool has a disclosure policy .