KMX

Carmax Inc

Consumer, Industrial/Transportation


Presented:07/30/2021
Price:$133.95
Cap:$21.83B
Current Price:$73.67
Cap:$11.41B

Presented

Date07/30/2021
Price$133.95
Market Cap$21.83B
Ent Value$34.51B
P/E Ratio18.85x
Book Value$28.89
Div Yield0%
Shares O/S162.94M
Ave Daily Vol1,155,091
Short Int4.00%

Current

Price$73.67
Market Cap$11.41B
CarMax, Inc. is a holding company, which engages in the retail of used vehicles and wholesale of vehicle auction operator. It operates through the CarMax Sales Operations and CarMax Auto Finance (CAF) segments. The CarMax Sales Operations segment comprises of all aspects of its auto merchandising and service operations. The CAF segment pertains to its finance operation, which offers vehicle financing services to customers buying retail vehicles. The company was founded by Richard L. Sharp and William Austin Ligon in 1993 and is headquartered in Richmond, VA.

Publicly traded companies mentioned herein: Ally Financial Inc (ALLY), Asbury Automotive Group Inc (ABG), Carmax Inc (KMX), Carvana Co (CVNA), Lithia Motors Inc (LAD), Vroom Inc (VRM)

Highlights

The presenter is short shares of CarMax Inc (KMX) and believes that high quality companies or perceived high quality companies like KMX shouldn’t have such earnings volatility and still trade at 18x - 19x. KMX’s earnings were down 15% in 2020, they’ll likely be up 80% in 2021, and he expects them to be down 15% - 20% in CY’2022. This volatility makes it hard to capitalize earnings, and in his view it's very clear that KMX is overearning given what has happened with auto dealers in general, in addition to the contribution from the CarMax Auto Finance (CAF) unit. Given the market’s current preference for defensive stocks he sees an interesting set up in the back half for KMX, which is perceived as a high-quality, defensive cyclical business, but in reality may not be as high quality as bullish investors perceive.

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Idea Discussion

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