Is Carvana Co. overvalued or undervalued?

As of 7 May 2025, Carvana Co. has moved from a fair to an expensive valuation grade. The company is currently considered overvalued given its high P/E ratio of 137, a Price to Book Value of 48.62, and an EV to EBITDA of 49.08. In comparison, its peer Williams-Sonoma, Inc. has a significantly lower P/E of 17.27 and EV to EBITDA of 11.12, indicating that Carvana's valuation is not justified relative to its peers.
Despite Carvana's strong ROCE of 26.25% and ROE of 35.40%, the high valuation metrics suggest that the market has priced in excessive growth expectations. The company's stock has outperformed the S&P 500 over the past year with a return of 183.28% compared to the index's 10.26%, but this may not be sustainable given the current valuation levels. Overall, Carvana appears to be overvalued in the current market environment.