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

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

Profitability

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

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

Analyst Ratings

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

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

KAR Auction Services presently has a consensus price target of $51.50, indicating a potential upside of 2.24%. Carvana has a consensus price target of $19.58, indicating a potential upside of 20.81%. Given Carvana’s stronger consensus rating and higher possible upside, analysts plainly believe Carvana is more favorable than KAR Auction Services.

Earnings and Valuation

This table compares KAR Auction Services and Carvana’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
KAR Auction Services $3.15 billion 2.16 $222.40 million $1.70 29.63
Carvana $365.14 million 5.89 -$93.11 million ($1.28) -12.66

KAR Auction Services has higher revenue and earnings than Carvana. Carvana is trading at a lower price-to-earnings ratio than KAR Auction Services, indicating that it is currently the more affordable of the two stocks.

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. Carvana has increased its dividend for 4 consecutive years.

Institutional and Insider Ownership

99.3% of KAR Auction Services shares are held by institutional investors. Comparatively, 15.2% of Carvana shares are held by institutional investors. 1.3% of KAR Auction Services shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

KAR Auction Services beats Carvana on 9 of the 15 factors compared between the two stocks.

About KAR Auction Services

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.

About Carvana

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.

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