There's no need to sugarcoat it. Investors putting money to work in the stock market undoubtedly want to become rich over time. Perhaps the specific monetary goal is to achieve a portfolio value of $1 million.

Some businesses, like Carvana (CVNA -4.00%), have already done that. This used car e-commerce stock is up a jaw-dropping 5,120% since the start of 2023 (as of Dec. 12). That would've turned a $20,000 investment into a cool $1 million in less than two years, a phenomenal return.

If you missed the Carvana ride, you might be wondering if its shares can make you a millionaire from this point forward. Here's what investors need to know about this resurging enterprise's prospects.

Carvana's rise, fall, and comeback

From the company's initial public offering in April 2017 to the stock's all-time high in August 2021, Carvana shares skyrocketed 3,230%. There were certainly millionaires being minted during that stretch as well.

Carvana found remarkable success by disrupting how used cars are sold in the U.S. Shoppers traditionally visit a brick-and-mortar car dealership, deal with an unpleasant salesperson, haggle uncomfortably on pricing, and search for a loan. Even worse, the process can take up an entire day.

Here's where Carvana shines. By operating solely online, managing a nationwide network of inventory, and bolstering its tech capabilities, it made the car-buying process seamless. Consumers could browse online, acquire financing, and complete the purchase in minutes. There's even a seven-day trial.

Between 2014 and 2021, Carvana's revenue jumped a staggering 305-fold, from $42 million to $12.8 billion. This was driven by rapidly expanding into new markets and selling more vehicles.

Then, the company slammed on the brakes. Tighter economic conditions that started in 2022 negatively impacted Carvana's results. Unit sales dipped 26% between 2021 and 2023.

Carvana's debt situation was the major red flag. It was so dire that management was forced to restructure its obligations in July 2023 to provide much-needed breathing room. Shares tanked 98% in 2022, a year when the business posted a $2.9 billion net loss.

The past several quarters have marked Carvana's monumental comeback, as leadership focused aggressively on expense reductions and finding efficiencies. The financial results reveal a company that has been trending in the right direction, to say the least. In the last quarter (Q3 2024 ended Sept. 30), Carvana's revenue and car volume increased 32% and 34%, respectively, on a year-over-year basis.

Gross profit per unit, a key metric that the leadership team tracks, hit an all-time high of $7,427 in Q3. That was up 25% compared to the year-ago period. This helped profitability figures improve drastically.

Expectations are high

After a stock's price rises 52-fold like Carvana's has in less than two years, astute investors should start to wonder if the valuation still makes sense. What's wild is that Carvana shares traded at a dirt-cheap price-to-sales (P/S) ratio of 0.031 at the start of 2023. At that time, the market had very real worries that the company was going to end up in bankruptcy. Pessimism was sky-high.

As financial results improved, investor sentiment became excessively bullish and optimistic. As of this writing, the stock trades at a P/S multiple of 3.38. Historically, Carvana's average P/S ratio is just 1.2. So, the current state of affairs certainly looks stretched if the past is any indication. That's one key reason to avoid the stock, as the belief is that the easy money has already been made.

If that valuation isn't alarming on its own, consider Carvana's balance sheet. While the business has made progress on the bottom line, it's still in a precarious financial position. As of Sept. 30, the company had $5.6 billion of long-term debt on the books. In the last four quarters, Carvana's interest payments totaled $668 million, barely covered by its cumulative operating income of $692 million during that same period of time.

Carvana's comeback has been nothing short of spectacular. And I'm sure the stock's climb has turned some risk-seeking investors into millionaires. But if you're looking to buy shares today, I believe the chances Carvana gets you into the seven-figure club are slim. In fact, I think the stock should be avoided.