3 Reasons Investors Love Copart (CPRT)

What a brutal six months it’s been for Copart. The stock has dropped 20.6% and now trades at $38.22, rattling many shareholders. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Following the pullback, is now an opportune time to buy CPRT? Find out in our full research report, it’s free.

Why Are We Positive On CPRT?

Starting as a single salvage yard in California in 1982, Copart (NASDAQ:CPRT) operates an online auction platform that connects sellers of damaged and salvage vehicles with buyers ranging from dismantlers and rebuilders to used car dealers and exporters.

1. Skyrocketing Revenue Shows Strong Momentum

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Copart’s sales grew at an incredible 15.1% compounded annual growth rate over the last five years. Its growth surpassed the average business services company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Copart’s EPS grew at an astounding 17.5% compounded annual growth rate over the last five years, higher than its 15.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Copart has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 23.9% over the last five years.

Final Judgment

These are just a few reasons why we think Copart is a high-quality business. After the recent drawdown, the stock trades at 23.8× forward P/E (or $38.22 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.

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