Here’s Why Copart (CPRT) is a Solid Investment Choice Now – November 20, 2023
Copart, Inc. (CPRT – Free Report) provides online auction and a wide range of remarketing services to process and sell salvage and clean title vehicles. Its salvage auction volumes, and the buyout of AVK and Vincent Auto Solutions are major tailwinds.
The Zacks Consensus Estimate for Copart’s 2024 revenues and earnings per share is pegged at $4.17 billion and $1.42, respectively, implying a rise of 7.65% and 12.7%, respectively, from the year-ago reported number.
Let us discuss the factors that highlight why Copart is an attractive pick.
Copart enjoys a leadership position in the automotive auction market, commanding roughly 40% of the market share. The company’s competitiveness is supported by its multiple locations (both domestic and international) and the size of its new facility openings. Thanks to its large scale, solid market leadership and continued expansion efforts, Copart’s revenues look poised for an upward trajectory.
Salvage auction volumes are likely to remain elevated amid an increase in vehicle miles traveled and a higher collision frequency. Aging vehicles and technologically advanced auto parts are proving to be a boon for industry participants like Copart. The costs of replacing such sophisticated components are extremely high, prompting insurance agencies to declare the vehicles a total loss. The expected increase in total loss rates bodes well for Copart’s top-line growth.
The buyout of AVK and Vincent Auto Solutions has expanded Copart’s portfolio and foothold. Expansion initiatives, along with a digital ramp-up, will aid Copart in a fast pickup across the country, fueling growth in a competitive marketplace. The launch of Copart Max has further stepped up its digital game. A strategic partnership with CHAMP titles to introduce an automated digital platform for car sellers also bodes well. The company recently invested in Purple Wave to expand its marketplace capabilities into new geographies or to service new asset types.
The firm’s strong balance sheet with low leverage and high liquidity provides it with financial flexibility. Copart’s total debt to capitalization is 0.2 compared with the industry’s 2.82. At the end of the first quarter of fiscal 2024, the company had $3.9 billion of liquidity, comprising $48 million in investments and held-to-maturity securities, $2.6 billion in cash/cash equivalents and an undrawn credit revolver of more than $1.2 billion.
Other Key Picks
CPRT currently carries Zacks Rank #2 (Buy).
Some other top-ranked players in the auto space are Volvo (VLVLY – Free Report) and Toyota Motor Corporation (TM – Free Report) , each currently sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year growth of 4.2% and 65.6%, respectively. The EPS estimates for 2023 and 2024 have increased by 28 cents and 13 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for TM’s 2023 sales and earnings indicates year-over-year growth of 10.6% and 29.7%, respectively. The EPS estimates for 2023 and 2024 have increased by 28 cents and 4 cents, respectively, in the past 30 days.
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