Shares of Copart Inc (CPRT, Financial) recently showcased a daily gain of 3.99%, with a modest 3-month gain of 0.96%. With an Earnings Per Share (EPS) standing at $1.39, investors are pondering whether the stock is fairly valued. To answer this, a deeper dive into Copart's valuation is necessary. The following analysis will explore whether the current market price reflects the true value of Copart.
Company Introduction
Copart Inc (CPRT, Financial), headquartered in Dallas, operates a robust online salvage vehicle auction platform with a global reach extending across 11 countries. The company's virtual bidding system, VB3, connects sellers with a vast network of over 750,000 registered buyers, including dismantlers, rebuilders, and used vehicle retailers. Insurance companies, providing around 80% of the vehicle volume, utilize Copart for managing total loss vehicles. The company's comprehensive services, like transportation and title transfer, bolster its value proposition. At a current price of $51.38, Copart's market capitalization stands at $49.30 billion, and its GF Value, an estimation of fair value, is $47.38. This comparison sets the stage for a thorough valuation analysis.
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock by considering historical trade multiples, an internal adjustment for past performance, and future business projections. The GF Value Line indicates the fair trading value of a stock. If a stock is trading significantly above this line, it may be overvalued and poised for poor future returns. Conversely, a price well below the line could signal undervaluation and the potential for higher returns. For Copart, the GF Value suggests the stock is fairly valued, implying that its long-term return could align closely with its business growth rate.
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Financial Strength
Investing in companies with robust financial strength mitigates the risk of capital loss. Key indicators such as the cash-to-debt ratio, which stands at 19.8 for Copart, provide insight into financial stability. This ratio places Copart ahead of 84.47% of its peers in the Business Services industry. GuruFocus awards Copart a financial strength rating of 9 out of 10, highlighting its strong position.
Profitability and Growth
Profitability, especially consistent over the long term, is a key indicator of a less risky investment. Copart has maintained profitability for the past decade. With a $4.10 billion revenue and an EPS of $1.39 over the past year, the company's operating margin of 39.3% ranks higher than 96.73% of its industry counterparts. GuruFocus rates Copart's profitability at 10 out of 10.
Regarding growth, Copart's 3-year average revenue growth rate outperforms 84.09% of the companies in the Business Services industry, and its EBITDA growth rate of 20.7% ranks above 67.64% of the industry players.
ROIC vs WACC
Evaluating a company's Return on Invested Capital (ROIC) in relation to its Weighted Average Cost of Capital (WACC) provides insight into its value creation. Copart's ROIC of 32.14 is substantially higher than its WACC of 11.74, indicating efficient capital utilization and shareholder value generation.
Conclusion
In conclusion, Copart (CPRT, Financial)'s stock seems to be fairly valued, reflecting the company's strong financial health and impressive profitability. Its growth prospects also appear promising when compared to industry peers. For a more detailed financial overview, interested investors can review Copart's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
