Copart Stock Price Leadership & 24% Price Drop – Time to Buy?
Copart (CPRT) stock deserves your consideration. Why? Because you get high margins – reflective of pricing power and cash generation capacity – for a discounted price. Here is some data.
- Revenue Growth: Copart saw growth of 9.7% LTM and 9.9% last 3 year average, but this is not a growth story
- Recent Profitability: Nearly 38.7% operating cash flow margin and 36.5% operating margin LTM.
- Long-Term Profitability: About 36.2% operating cash flow margin and 37.3% operating margin last 3 year average.
- Available At Discount: At P/S multiple of 8.9, CPRT stock is available at a 24% discount vs 1 year ago.
While revenue growth helps, this is not a growth perspective. Pricing power and high margins generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. Market tends to reward that.
As a quick background, Copart provides online vehicle auctions and remarketing services globally using advanced virtual bidding technology for licensed dismantlers, rebuilders, dealers, and exporters.
| CPRT | S&P Median | |
|---|---|---|
| Sector | Industrials | – |
| Industry | Diversified Support Services | – |
| PS Ratio | 8.9 | 3.1 |
| PE Ratio | 26.7 | 23.7 |
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| LTM* Revenue Growth | 9.7% | 5.6% |
| 3Y Average Annual Revenue Growth | 9.9% | 5.3% |
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| LTM* Operating Margin | 36.5% | 18.8% |
| 3Y Average Operating Margin | 37.3% | 18.2% |
| LTM* Op Cash Flow Margin | 38.7% | 20.4% |
| 3Y Average Op Cash Flow Margin | 36.2% | 19.8% |
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| DE Ratio | 0.3% | 20.9% |
*LTM: Last Twelve Months
But do these numbers tell the full story? Read Buy or Sell CPRT Stock to see if Copart still has an edge that holds up under the hood.
If you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio (HQ) – HQ has outperformed its benchmark – a combination of S&P 500, Russell, and S&P midcap index, and achieved returns exceeding 105% since its inception. Risk management is key – consider, what could long-term portfolio performance be if you blended 10% commodities, 10% gold, and 2% crypto with HQ’s performance metrics.
Stocks Like These Can Outperform. Here Is Data
Here is how we make the selection: We consider stocks > $10 Bil in market cap, and then include those with high CFO (cash flow from operations) margins or operating margins. We additionally consider only those stocks that have meaningfully declined in valuation over the past 1 year.
Below are statistics for stocks with this selection strategy applied since 12/31/2016.
- Average 12-month forward returns of nearly 19%
- 12-month win rate (percentage of picks returning positive) of about 72%
But Consider The Risk
CPRT isn’t immune to major sell-offs. It lost about 52% in the Global Financial Crisis and around 44% during both the Dot-Com Bubble and the Covid pandemic. The 2018 correction still dragged it down over 32%, while the inflation shock wiped out roughly 35%. Even with solid fundamentals, this stock can take significant hits when markets turn volatile.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read CPRT Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.