Carvana Co (NYSE:CVNA) Fits Louis Navellier’s High-Growth Stock Criteria with Strong Earnings and Sales Momentum

Louis Navellier’s The Little Book That Makes You Rich presents a structured method for spotting high-growth stocks using eight key rules. These rules center on earnings adjustments, sales and earnings increases, operating margin improvements, cash flow stability, and return on equity, metrics that together highlight a company’s capacity to maintain and boost profitability. By using these filters, investors seek to find stocks with strong growth potential before the wider market notices. One stock currently fitting these rules is CARVANA CO (NYSE:CVNA), an online platform for used car sales. Below, we explore how CVNA matches Navellier’s framework.

How CVNA Fits the Little Book Rules

1. Upward Earnings Adjustments
   Analysts have increased CVNA’s next-quarter EPS estimates by 35.08% over the past three months, a clear sign of rising expectations. This matches Navellier’s focus on adjustments as a predictor of future results, indicating analysts see better fundamentals.

2. Consistent Earnings Beats
   CVNA has exceeded EPS estimates in all of the last four quarters, with an average beat of 169.37%. Regular outperformance builds trust in management’s ability to deliver and the company’s capacity to surpass cautious forecasts.

3. Rising Sales Growth
   The company’s revenue grew 32.23% year-over-year (TTM) and 38.26% quarter-over-quarter, showing strong demand for its online car sales platform. Faster sales growth is vital for growth investors, as it often leads to better margins and higher profitability.

4. Growing Operating Margin
   CVNA’s operating margin jumped 392.36% over the past year, highlighting major gains in efficiency. Navellier points to margin growth as a critical factor for earnings increases, as it shows control over costs and pricing.

5. Healthy Cash Flow
   Free cash flow rose 184.66% year-over-year, demonstrating CVNA’s stronger liquidity and ability to fund its own growth. Solid cash flow reduces the need for outside financing and supports reinvestment or debt paydown.

6. Earnings Expansion
   CVNA’s EPS climbed 260.11% year-over-year (TTM) and 556.52% quarter-over-quarter, reflecting fast profit growth. Such high growth rates are typical of companies likely to outperform the market.

7. Strong Earnings Momentum
   The company’s quarterly EPS growth (556.52%) far exceeded its year-ago growth rate (115.23%), meeting Navellier’s acceleration rule. Momentum in earnings suggests lasting operational gains.

8. High Return on Equity (ROE)
   CVNA’s ROE of 26.46% ranks among the top in its industry, showing effective use of investor capital. Navellier prefers high ROE as a sign of competitive strength and scalability.

Fundamental Overview

CVNA’s fundamental analysis report gives it a score of 5/10, showing mixed profitability but strong growth and financial health. Key points:

• Profitability: Operating margins (8.42%) and ROE (26.46%) are better than peers, though gross margins (21.65%) are weaker.
• Valuation: Pricey on traditional measures (P/E of 116.53), but growth expectations (42.89% annual EPS forecast) may support the high valuation.
• Liquidity: Strong current ratio (3.81) and quick ratio (2.70) indicate good short-term financial flexibility.

Why Growth Investors Should Take Note

Navellier’s strategy looks for companies moving from high growth to wider market attention. CVNA’s rapid sales and earnings growth, along with better margins and cash flow, make it a candidate for this stage. While its valuation is high, the growth path aligns with the Little Book’s emphasis on fundamentals that often come before price gains.

For investors searching for similar opportunities, the Little Book screener provides a selected list of stocks meeting these strict rules.

Disclaimer: This analysis is not investment advice. Perform thorough research or consult a financial advisor before making investment decisions.