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CVNA vs. SAH: Breaking Down Which Auto Retail Stock Stands Stronger

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Key Takeaways

  • Carvana posted 41% growth in retail volumes and 70% EBITDA gain in Q2, with $2-$2.2B projected for 2025.
  • Sonic's EchoPark EBITDA jumped 128% in Q2, with record income of $11.7M.
  • Carvana's operational efficiency is paying off, while Sonic's acquisitions bode well.

U.S. auto retailers Carvana Inc. (CVNA - Free Report) and Sonic Automotive (SAH - Free Report) are two companies carving out different paths. Carvana is betting big on a digital-first model with car vending machines, while Sonic combines traditional dealerships with growing online capabilities. While CVNA focuses on used cars, SAH deals with both used and new vehicles. But which one has the stronger case for investors right now? Let’s take a closer look.

The Case for Carvana

Carvana is the second-largest used car retailer in the country, yet it holds just a 1.5% market share in what is still a highly fragmented industry. This means there’s plenty of room to grow, especially as more customers become comfortable buying cars entirely online.

Growth is coming through strongly in the numbers. Retail units sold in the second quarter of 2025 jumped 41% on robust demand. The company expects momentum to continue, with a sequential increase in sales in the third quarter. Financial performance has also been impressive. Adjusted EBITDA surged 70% year over year to $601 million in the last reported quarter, with industry-leading margins of 12.4%. For the full year, Carvana projects adjusted EBITDA of $2-$2.2 billion, up sharply from $1.38 billion last year.

Much of this strength comes from efficiency improvements. Carvana has reduced retail reconditioning and transport costs by insourcing third-party services, optimizing staffing, developing proprietary software and tightening logistics. Its acquisition of ADESA’s U.S. operations has strengthened the business by expanding its auction capabilities and reconditioning infrastructure. Carvana is also scaling ADESA Clear, its digital auction platform, which adds another growth lever.

Still, risks remain. The biggest concern is the balance sheet. Long-term debt was $5.3 billion as of June 30, 2025, up slightly from year-end levels. With a debt-to-capital ratio of 0.72 — more than double the auto sector’s average — Carvana doesn’t have much flexibility if market conditions turn.

Even so, Carvana’s strong top-line momentum, efficiency gains and long runway for growth make it a compelling story for investors willing to stomach the debt risk.

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The Case for Sonic

Sonic Automotive takes a very different approach. The company operates a broad network of dealerships selling both new and used vehicles. This mix gives it diversified revenue streams that help balance out cyclical risks. Its high-margin parts, services and finance/insurance (F&I) divisions now contribute nearly 75% of gross profit, creating a steady profit base that isn’t as sensitive to swings in vehicle sales.

A major bright spot has been the EchoPark segment, which specializes in used car sales. After a difficult 2023, EchoPark has turned the corner. It posted $27.6 million in adjusted EBITDA in 2024 and delivered record results in the last reported quarter, with income of $11.7 million and adjusted EBITDA up 128% year over year to $16.4 million. While management expects margin pressure in the near term, the segment looks well-positioned for long-term growth if used car demand remains favorable.

Sonic Automotive is also using acquisitions to fuel expansion. The purchase of four Jaguar and Land Rover dealerships in California in the second quarter of 2025 made Sonic the country’s largest retailer of those luxury brands. The new stores are expected to add around $500 million in annual revenues, bolstering Sonic’s premium lineup.

Shareholders are also seeing rewards. The company has raised its dividend seven times in the past five years. The most recent hike lifted the payout by 9% to 38 cents per share.

But like Carvana, Sonic Automotive faces balance sheet concerns. Long-term debt was $1.47 billion as of June 30, far outpacing its $110 million in cash. The debt-to-capital ratio of 0.62 is elevated, and its times interest earned ratio of 2.5 is well below the sector average of 7.

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CVNA vs. SAH: Price Performance and Valuation

Year to date, Carvana shares have jumped 78%, outperforming Sonic Automotive.

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Carvana is trading at a forward sales multiple of 3.51, quite above its median of 1.95, over the last five years. SAH’s forward sales multiple sits at 0.19 compared with its median of 0.14 over the last five years.

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Carvana seems pricey. However, its valuations reflect its high growth expectations and improving profitability. 

Conclusion

Carvana offers high growth potential, riding the wave of digital adoption in car buying, but its heavy debt load remains a red flag. Sonic Automotive brings stability through diversified revenues and dealership scale. However, it also carries leverage risks. Both companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Still, if we have to choose between the two, Carvana looks better placed right now. Its strong unit growth, rising profitability and unique digital model give it a clearer runway for scaling up in a fragmented market. While debt remains a concern, the company’s operational efficiency and improving margins offer respite. While Sonic offers balance and steady dividends, Carvana’s growth story feels more compelling for investors seeking upside.


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