Analyzing Carvana (CVNA) and KAR Auction Services (KAR)

Carvana (NYSE: CVNA) and KAR Auction Services (NYSE:KAR) are both mid-cap retail/wholesale companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, valuation, institutional ownership, analyst recommendations, earnings, risk and profitability.

Insider and Institutional Ownership

15.2% of Carvana shares are held by institutional investors. Comparatively, 99.2% of KAR Auction Services shares are held by institutional investors. 1.3% of KAR Auction Services shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Carvana and KAR Auction Services’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Carvana $365.14 million 7.43 -$93.11 million N/A N/A
KAR Auction Services $3.15 billion 2.18 $222.40 million $1.70 29.85

KAR Auction Services has higher revenue and earnings than Carvana.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Carvana and KAR Auction Services, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Carvana 1 3 10 0 2.64
KAR Auction Services 0 2 3 0 2.60

Carvana presently has a consensus price target of $20.08, suggesting a potential downside of 1.70%. KAR Auction Services has a consensus price target of $51.50, suggesting a potential upside of 1.50%. Given KAR Auction Services’ higher possible upside, analysts clearly believe KAR Auction Services is more favorable than Carvana.

Profitability

This table compares Carvana and KAR Auction Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Carvana -11.81% -153.67% -19.89%
KAR Auction Services 6.94% 22.37% 4.73%

Dividends

KAR Auction Services pays an annual dividend of $1.28 per share and has a dividend yield of 2.5%. Carvana does not pay a dividend. KAR Auction Services pays out 75.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KAR Auction Services has raised its dividend for 4 consecutive years.

Summary

KAR Auction Services beats Carvana on 10 of the 14 factors compared between the two stocks.

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.

KAR Auction Services Company Profile

KAR Auction Services, Inc. is a provider of whole car auction services in North America, and salvage auction services in North America and the United Kingdom. The Company operates through three segments: ADESA, Inc. (ADESA Auctions or ADESA), Insurance Auto Auctions, Inc. (IAA) and Automotive Finance Corporation (AFC). The ADESA segment is a provider of whole car auctions and related services to the vehicle remarketing industry in North America. It serves its customer base through online auctions and auction facilities that are developed and located to draw professional sellers and buyers together, and allow the buyers to inspect and compare vehicles remotely or in person. As a provider of salvage vehicle auctions and related services, it operates as IAA in the United States and Impact Auto Auctions in Canada, and serves customer base through salvage auction locations throughout North America. The AFC segment provides floorplan financing to independent used vehicle dealers.

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