ACV Auctions Inc. (ACVA) stock intrinsic value fair value estimate & owner earnings analysis

ACV Auctions runs an online wholesale auction where car dealers and commercial sellers trade used vehicles. It earns fees only when a sale completes (marketplace and service revenue, 89% of 2025 revenue of $759.6 million, up 19% from $637.2 million) plus vehicle-condition guarantees sold to buyers (customer assurance, 11%). In 2025 it sold 829,276 vehicles (743,008 in 2024) worth $10.4 billion, to 22,062 buyers from 14,905 sellers. It also lends to dealers through ACV Capital. The key point for value: after stock compensation, the business does not yet earn money for owners. We measure owner earnings as operating cash flow, less swings in working capital, less stock compensation, less the capital spending needed to keep the platform going (including capitalized software, $35.6 million in 2025). Working capital matters a lot here because ACV holds $390.8 million of payables, mostly cash owed to sellers on auctions, and that balance swings with timing. On this basis owner earnings per share were about -$0.56 (2021), -$0.64 (2022), -$0.45 (2023), -$0.35 (2024) and -$0.13 (2025). The trend is clearly improving: 2025 operating cash flow was $78.2 million, but stock compensation of $56.9 million (down from $68.0 million) and maintenance spending of about $38.2 million consumed all of it and more, leaving about -$23.0 million. Reported net loss in 2025 was $66.1 million. We did not set the anchor from 2025 alone; every year in the record is negative, so there is no positive earnings level to capitalize. Accounting judgements: stock compensation is treated as a real cost. Capitalized software is treated as ongoing capital spending, with only a share of spending, in proportion to revenue growth, treated as growth investment. Non-cash charges such as amortization and bad-debt provisions are added back through operating cash flow. Lending to dealers is shown in investing cash flow, not operating, so growth of the finance receivable book ($75.8 million of net new lending in 2025, funded partly by borrowings that rose to $190 million from $123 million) is outside owner earnings. We did not subtract that lending, but it is a real use of capital. In 2025 ACV recorded an $18.7 million loss on floorplan loans to Tricolor, a dealer-finance company that filed for bankruptcy in September 2025; in its 2025 10-K, ACV disclosed that Tricolor faces allegations of significant fraud being investigated by federal authorities. The allowance on finance receivables rose to $29.0 million from $4.2 million. Cash of $271.5 million exceeds the $190 million borrowed, but we do not count balance-sheet cash as earning power. Bear case ($0 per share): owner earnings stay negative, in the range of the last two years, and nothing supports value. We will not credit revenue growth, better margins or falling stock compensation, because none of that is locked in. A further credit-loss episode in the lending book is an evidenced risk (the Tricolor loss shows it can happen). Debt is smaller than cash, so we do not see the equity owing more than it is worth. Base case ($0 per share): the median path we can support from evidence is that owner earnings stay near the 2025 level of about -$0.13 per share. The improvement of the last four years came from revenue growth outpacing costs and from lower stock compensation. Those are share gains and margin expansion, which are not contracted or repeatable in the sense we require, so we give them no value. The business is not at zero in a practical sense, and the trend is favorable, but the base case cannot show earnings to value. Bull case ($4.60 per share): the trend of the past two years continues. Owner earnings per share improved by an average of about $0.16 a year from 2023 to 2025 (-$0.45 to -$0.13); we assume $0.15 a year. That takes owner earnings to about $0.02 in 2026 and $0.62 by 2030, held flat through 2040 and worth nothing after that, discounted at 6%. Fifteen years is a judgement: revenue has grown every year on record, but we cannot point to a moat that lasts longer. This is a case where the company's own operating trend continues, not one that assumes a market recovery. What would make this wrong: if operating leverage keeps working, owner earnings could turn positive faster and value would be well above the base case. If the lending book or used-vehicle market deteriorates, the bear case applies. Share count is also rising, at about 3% a year (159.95 million diluted shares in 2023, 170.58 million in 2025). The margin-of-safety price of $1.50 is conditional. It is about a third of the bull value, reflecting how uncertain the path is and how little of it is in hand. It applies only once owner earnings are clearly positive after stock compensation, as described in the trigger, because today there are no owner earnings to value.