CarMax vs Carvana Which Is a Better Investment?

CarMax and Carvana are two prominent players in the used car industry, each offering a unique approach to car buying. CarMax, with its traditional showroom model, has established itself as a trusted name in the industry. On the other hand, Carvana has disrupted the market with its online-only platform and innovative delivery options. Both companies have seen significant growth in recent years, but investors are divided on which stock holds more potential for the future. Let's take a closer look at the performance and prospects of CarMax and Carvana stocks.

CarMax or Carvana?

When comparing CarMax and Carvana, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between CarMax and Carvana.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. CarMax has a dividend yield of -%, while Carvana has a dividend yield of -%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. CarMax reports a 5-year dividend growth of 0.00% year and a payout ratio of 0.00%. On the other hand, Carvana reports a 5-year dividend growth of 0.00% year and a payout ratio of 0.00%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with CarMax P/E ratio at 32.20 and Carvana's P/E ratio at 1809.06. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. CarMax P/B ratio is 2.18 while Carvana's P/B ratio is 50.33.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, CarMax has seen a 5-year revenue growth of 0.99%, while Carvana's is 0.51%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with CarMax's ROE at 6.83% and Carvana's ROE at 4.07%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $85.53 for CarMax and $243.49 for Carvana. Over the past year, CarMax's prices ranged from $65.83 to $88.22, with a yearly change of 34.01%. Carvana's prices fluctuated between $40.21 and $268.34, with a yearly change of 567.36%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.