Carvana's Insider Exodus: A Red Flag for Overvaluation and Investor Beware

Carvana (NYSE: CVNA), the disruptor of the used-car retail market, has long been celebrated for its innovative "e-commerce meets automotive" model. But behind the scenes, a troubling pattern is unfolding: over the past 12 months, 110 insider selling transactions have been reported—not a single buy—while the stock trades at a valuation so extreme it defies reason. This is not just a red flag—it’s a full-blown warning siren. Let’s dissect why investors should think twice before jumping into this overhyped stock.

The Insider Sell-Off: A Mass Exodus from the Top

The most recent insider sale came on May 16, 2025, when Ryan Keeton, Carvana’s Chief Brand Officer, sold 13,137 shares at $300 per share. This wasn’t an isolated incident. In the past year, executives like CFO Mark Jenkins and COO Benjamin Huston have unloaded millions of dollars worth of shares. The most egregious seller? Ernest Garcia, co-founder and former CEO, who has sold $1.52 billion of his holdings over two years.

These aren’t small "diversification" moves. Garcia’s sales alone represent 37% of total insider transactions since 2023, and in the last 12 months, insiders collectively sold over $1 billion of Carvana stock. Meanwhile, not a single insider has bought a single share in that time.

This is textbook caution. As Peter Lynch famously noted, “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.” With zero buys, Carvana’s insiders are clearly not in buying mode.

The Overvaluation Math: A Disconnect from Reality

The stock’s fundamentals are even more concerning. Carvana trades at a price-to-earnings ratio of 105.22, nearly six times the industry median of 17.28. To put this in perspective, even at the peak of the 2021 meme-stock frenzy, few stocks carried such a stratospheric multiple.

And it gets worse. GuruFocus’ intrinsic value model assigns Carvana a price-to-GF-Value ratio of 6.39x, meaning the stock trades at 6.39 times its estimated fair value. This isn’t a slight overvaluation—it’s a massive premium. For comparison, companies like Amazon or Tesla rarely trade above 3x their intrinsic value.

Why This Matters Now: The Risks Are Piling Up

Carvana’s business model, while innovative, is far from bulletproof. The company’s reliance on used cars leaves it vulnerable to economic downturns, and its home-delivery model faces rising competition from traditional dealerships and startups. Meanwhile, its debt-to-equity ratio of 4.02 suggests financial fragility.

The lack of insider confidence compounds these risks. When executives sell aggressively while the stock is near $300—a price that already assumes flawless execution—it’s hard to argue they see the same future investors are being sold.

The Bottom Line: A Stock to Avoid

Carvana is a cautionary tale of valuation disconnect and insider skepticism. With a P/E ratio that mocks industry norms, a GuruFocus valuation suggesting a 83% overvaluation (since 1/6.39 = ~16% of fair value), and zero insider buying in over a year, this stock is a prime candidate for a brutal correction.

Investors should heed the warning signs. Avoid Carvana until there’s concrete evidence of sustainable profitability—or better yet, until insiders start buying again. Until then, this is a stock where the greed of the crowd far outweighs the judgment of those who know it best.

Final Call: Stay far away from CVNA. The risks of overvaluation and lack of insider confidence are too great to justify the reward.