CarMax Stock Fell 26% in a Month, What Now?

CarMax (KMX) stock is down 26.4% in 21 trading days. History of recovery post-dips is not on your side and there is fundamental risk – specific to growth, profitability, balance sheet and downturn resilience. Consider the following data:

• Size: CarMax is a $6.6 Bil company with $26 Bil in revenue currently trading at $44.42.
• Fundamentals: Last 12 month revenue growth of 1.8% and operating margin of -0.9%.
• Liquidity: Has Debt to Equity ratio of 2.89 and Cash to Assets ratio of 0.02
• Valuation: CarMax stock is currently trading at P/E multiple of 12.7 and P/EBIT multiple of 4.2
• Has returned (median) 7% within a year following sharp dips since 2010. See KMX Dip Buy Analysis.

While we like to buy dips if the fundamentals check out – for KMX, see Buy or Sell KMX Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and KMX drops another 20-30% to $31 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience. Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

KMX stock has fallen meaningfully recently and we currently find it unattractive. This may feel like a caution, and there is significant risk in relying on a single stock. However, there is a huge value to a broader diversified approach. Strategic asset allocation and diversification helps you stay invested. Did you know investors who panicked out of the S&P in 2020 lost significant upside that followed? Trefis High Quality Portfolio and Empirical Asset Management’s asset allocation approach are designed to reduce volatility so you can stay the course.

Below are the details, but before that, as a quick background: KMX operates as a retailer of used vehicles in the U.S., offering sales and auto financing through approximately 230 stores nationwide.

2022 Inflation Shock

• KMX stock fell 64.0% from a high of $154.85 on 9 November 2021 to $55.69 on 21 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $89.19 on 18 February 2025 , and currently trades at $44.42

2020 Covid Pandemic

• KMX stock fell 56.6% from a high of $101.90 on 20 February 2020 to $44.27 on 20 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 August 2020

2018 Correction

• KMX stock fell 29.7% from a high of $80.68 on 12 September 2018 to $56.72 on 20 December 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 June 2019

2008 Global Financial Crisis

• KMX stock fell 78.7% from a high of $29.25 on 24 January 2007 to $6.23 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 8 October 2010

Worried that KMX could fall much more? You could take a look at 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.