Shareholders of Copart would probably like to forget the past six months even happened. The stock dropped 24.9% and now trades at $44.65. This may have investors wondering how to approach the situation.
Following the pullback, is this a buying opportunity for CPRT? Find out in our full research report, it’s free for active Edge members.
Why Is Copart a Good Business?
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
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Copart’s 16.1% annualized revenue growth over the last five years was incredible. Its growth beat the average business services company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Copart’s EPS grew at an astounding 20% compounded annual growth rate over the last five years, higher than its 16.1% 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 23.3% over the last five years.
Final Judgment
These are just a few reasons Copart is a rock-solid business worth owning. With the recent decline, the stock trades at 26.4× forward P/E (or $44.65 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More Than Copart
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