Copart (CPRT) Stock Analysis

Overview

Copart, Inc. (CPRT) operates an online auction and vehicle remarketing platform primarily serving insurance companies that sell totaled or damaged vehicles, as well as dealers, rental car companies, and financial institutions. With a market cap of approximately $38.6 billion, Copart is the dominant scaled player in salvage vehicle auctions and has expanded internationally beyond its core U.S. business.

The stock is currently valued at a trailing P/E of ~24.4 with a forward P/E of ~22.1, implying the market still assigns a growth and quality premium despite a ~28% decline over the last 52 weeks (52‑week change: -28.4% vs +19.4% for the S&P 500). Institutional ownership is high, with ~86.6% of shares held by institutions, and the average analyst rating implies a “buy” stance (recommendation mean 2.33, with a mean target price of ~$48.9).

Profitability & Cash Flow

Copart’s economic profile is defined by exceptionally strong margins and cash generation for an industrial‑adjacent business:

• Operating margin: ~37.3%
• EBITDA margin: ~42.5%
• Net profit margin: ~34.2%

These margins are unusually high versus most physical‑asset logistics or auction peers and underscore the power of Copart’s digital marketplace model and fee structure. The company’s return on equity (~18.1%) is solidly above typical cost‑of‑capital levels, reinforcing that Copart is generating attractive returns on shareholder capital even without excessive leverage.

On liquidity and leverage:

• Debt-to-equity: ~1.04, indicating moderate leverage but not excessive for the cash‑flow profile.
• Current ratio: ~7.94, signaling very strong near‑term liquidity and a conservative balance sheet.

Copart generates robust cash:

• Free cash flow: ~$1.07 billion (trailing), which provides ample capacity for growth capex (yards, technology), selective M&A, and shareholder returns.
• Price to sales (TTM): ~8.28x and price to book: ~4.02x, both consistent with a high‑margin, asset‑light, and relatively low‑risk business, but also reflecting a premium multiple.

EPS Trends and Surprises

The earnings history provided spans over two decades and shows a long pattern of largely meeting or exceeding EPS expectations with periodic misses:

• In the more recent period, Copart has delivered multiple positive surprises:
  • 0.36 vs 0.32 EPS estimate (+12.5% surprise),
  • 0.34 vs 0.32 (+4.8%),
  • 0.40 vs 0.37 (+7.5%),
  • 0.41 vs 0.39 (+5.1%) and 0.41 vs 0.36 (+13.3%) in later quarters.
• There have also been occasional misses, e.g. 0.33 vs 0.34 (-4.3%) and 0.33 vs 0.37 (approx. -9.9%) in some quarters, reminding investors of cyclical or operational sensitivity.

Overall, the long‑term pattern is one of steady EPS progression with a bias toward positive surprise, consistent with disciplined execution and some conservatism in guidance. The recent mix of beats and misses suggests that, as the company matures and macro/auto cycles become more volatile, quarterly results may be bumpier even if the multi‑year trajectory remains upward.

Growth Profile

Current snapshot metrics point to a moderating but still positive growth backdrop:

• Earnings growth (recent): ~10.8%
• Revenue growth (recent): ~0.7%

The divergence between earnings growth and lower reported revenue growth suggests a recent period where margin expansion, mix, or efficiency improvements have outpaced top‑line expansion. Potential drivers include:

• Higher fees per vehicle and ancillary service penetration (e.g., title processing, storage, international buyer services).
• Mix shift to higher‑value vehicles or geographies.
• Operating leverage from digital and yard infrastructure.

However, 0.7% revenue growth is modest and raises questions about near‑term volume dynamics, used‑car prices, and total loss frequencies. Historically, Copart’s structural growth drivers have included:

• A rising global car parc and aging vehicle fleet, increasing total loss potential.
• Rising repair costs and complexity, which can push insurers to total vehicles more frequently.
• Expansion into new markets (Europe, Middle East, etc.) and categories (non‑insurance, dealer, fleet volumes).
• Increased global buyer participation, which can support salvage values and fees.

The forward P/E of ~22.1 vs trailing P/E of ~24.4 suggests the market expects mid‑teens or at least high‑single‑digit EPS growth from here, aligning broadly with the ~10–11% earnings growth snapshot. If revenue growth reaccelerates from the current low base, upside to this outlook exists; conversely, if low revenue growth persists, margin‑driven EPS gains may be more constrained.

Competitive Landscape

Copart operates in a niche but strategically important segment of the automotive ecosystem: salvage and wholesale auctions. Its primary competitive advantages include scale (yard network, inventory density), a proprietary, globally accessible digital platform, deep relationships with major insurers, and strong data and logistics capabilities. Key competitors and comparables include:

IAA (Ritchie Bros. / RB Global)

IAA, now part of RB Global, is Copart’s most direct salvage‑auction competitor, with a similar focus on insurance total‑loss vehicles. IAA has historically been the clear No. 2 in the U.S., with a sizeable but smaller yard network and buyer base compared to Copart.

• Strategic implication: The combined RB Global/IAA platform could over time leverage RB’s technology, capital, and global buyer base to narrow the gap with Copart, particularly in data analytics, cross‑selling across asset classes, and international expansion.
• Relative position: Copart still appears to hold the stronger market position and margin profile, but the competitive intensity could rise given IAA’s new parent.

KAR Auction Services (OPENLANE)

KAR (rebranded as OPENLANE) focuses more on whole‑car dealer‑to‑dealer auctions and remarketing rather than pure salvage. Nonetheless, there is overlap in the broader wholesale auction and remarketing space.

• Strategic implication: KAR is a key peer when investors compare valuation and margin structures across digital auction platforms.
• Relative position: Copart typically has higher margins and returns due to its salvage niche and structural dynamics, but both face similar technology and marketplace competition risks.

Ritchie Bros. / RB Global (Heavy Equipment & Vehicles)

Beyond IAA, RB Global’s core business in heavy equipment and industrial auctions is not a direct substitute but is comparable as a scaled, global auction marketplace platform.

• Strategic implication: RB Global’s expertise in running global auctions, deploying technology, and leveraging data makes it a credible long‑term competitor or benchmark in marketplace quality and monetization.
• Relative position: Copart remains more specialized in vehicles and has deeper insurance relationships; RB is diversified across asset classes but can cross‑pollinate capabilities into salvage.

ACV Auctions

ACV is a digital‑native, mobile‑centric marketplace focused on dealer‑to‑dealer used vehicle auctions.

• Strategic implication: ACV exemplifies the kind of technology‑driven, software‑rich competition that could, over a long horizon, pressure fee structures, buyer/seller expectations, and product innovation in vehicle auctions.
• Relative position: ACV is still much smaller in scale and focused on a different customer segment, but its rapid innovation cadence is a relevant reference point for Copart’s own technology investments.

Manheim (Cox Automotive, privately held)

Manheim is a massive whole‑car auction and remarketing player, with a large physical and digital presence.

• Strategic implication: While largely focused on whole‑car, dealer, and commercial remarketing rather than salvage, Manheim’s scale and digital platforms make it a competitive benchmark for user experience and marketplace liquidity.
• Relative position: Copart dominates the salvage category; Manheim dominates broader wholesale remarketing. Cross‑category encroachment is a long‑term risk if either leverages its platform to expand more aggressively into the other’s core niche.

Bottom line: Copart combines a dominant competitive position, exceptional margins, strong free‑cash‑flow generation, and a conservative balance sheet. The long‑term thesis rests on continued structural growth in salvage volumes and fee monetization, against risks tied to auto‑cycle volatility, insurance total loss practices, and intensifying competition from scaled auction and digital marketplace peers.