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Generally speaking, investors are inspired to be stock pickers by the potential to find the big winners. You won't get it right every time, but when you do, the returns can be truly splendid. One such superstar is Carvana Co. (NYSE:CVNA), which saw its share price soar 819% in three years.
Anyone who held for that rewarding ride would probably be keen to talk about it.
Because Carvana made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last 3 years Carvana saw its revenue grow at 54% per year. That's much better than most loss-making companies. In light of this attractive revenue growth, it seems somewhat appropriate that the share price has been rocketing, boasting a gain of 109% per year, over the same period. Despite the strong run, top performers like Carvana have been known to go on winning for decades. In fact, it might be time to put it on your watchlist, if you're not already familiar with the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Carvana stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Pleasingly, Carvana's total shareholder return last year was 229%. That's better than the annualized TSR of 109% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Carvana (of which 1 is a bit concerning!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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