Carvana Co. (CVNA) vs Johnson & Johnson (JNJ): Which Is the Better Buy in 2026?
As of 2026-11-01, CVNA is undervalued at $68, with a DCF intrinsic value of $103 and a margin of safety of 34%. JNJ is overvalued at $273, with an intrinsic value of $203 and a margin of safety of -35%. Of the two, CVNA has the wider margin of safety.
Rewards
- ★Each dollar of retained earnings has created $16.78 of earning power — management is an exceptional capital allocator.
- ★Trailing P/E of 32.8x is 43% below the historical average of 57.5x — potentially undervalued relative to its own history.
- ★Altman Z-Score of 6.47 indicates very low bankruptcy risk — the company is firmly in the safe zone.
- ★Johnson & Johnson has maintained ROIC above 15% for 4 consecutive years, indicating a durable competitive advantage.
- ★Gross margin of 67.8% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Johnson & Johnson scores 90/100 on the Economic Moat Score (Wide Moat), with revenue predictability as the strongest competitive dimension.
Risks
- ⚠Gross margin of 19.0% is low, suggesting a competitive or commodity-like market with limited pricing power.
- ⚠Share count has increased by 34% over the past 4 years, diluting existing shareholders.
- ⚠FCF yield of 1.2% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠FCF yield of 2.8% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠Trailing P/E of 41.5x is 108% above the historical average of 20.0x — the stock trades at a premium to its own history.
- ⚠PEG ratio of 3.07 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $68?
The market implies +20.4% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +28.0%, reflecting heavy growth investment expected to generate future returns.
What growth rate is the market pricing in at $273?
The market implies +9.9% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +16.1%, reflecting heavy growth investment.
Economic Moat Score
Learn more →No durable moat detected, though reinvestment efficiency shows some competitive positioning. The business lacks consistent evidence of sustainable advantages.
Wide moat with strength across all dimensions. Revenue Predictability is the standout factor.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is pricing this stock without strong emotion in either direction"
"Market is optimistic — be cautious and ensure you have a margin of safety"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: CVNA vs JNJ
Is Carvana Co. or Johnson & Johnson more undervalued in 2026?▼
Based on our discounted cash flow model, CVNA trades at a 33.9% margin of safety (intrinsic value $103 vs. price $68), compared to JNJ's -34.7% margin of safety (intrinsic $203 vs. $273).
Which stock has a wider economic moat, Carvana Co. or Johnson & Johnson?▼
JNJ scores 90/100 (Wide moat), while CVNA scores 38/100 (None moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Which company has better free cash flow, Carvana Co. or Johnson & Johnson?▼
Johnson & Johnson (JNJ) generates a 2.8% free cash flow yield, compared to Carvana Co.'s 1.2%. A higher FCF yield means the business converts more of its market value into cash that can be returned to shareholders or reinvested.
Which stock has higher return on invested capital, Carvana Co. or Johnson & Johnson?▼
CVNA earns 17.0% ROIC versus JNJ's 16.0%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.
Does Carvana Co. have accounting red flags?▼
CVNA's Beneish M-Score of -0.4 flags it as a likely earnings manipulator (above the -1.78 threshold). By contrast, JNJ scores -2.3, within the normal range. The Beneish model detects aggressive accounting through eight financial ratios.