CPRT
Copart, Inc.
Industrial/Transportation
08/18/2024
Presented
| Date | 08/12/2024 |
| Price | $50.26 |
| Market Cap | $48.37B |
| Ent Value | $50.08B |
| P/E Ratio | 35.24x |
| Book Value | $7.45 |
| Div Yield | 0% |
| Shares O/S | 962.30M |
| Ave Daily Vol | 4,488,685 |
| Short Int | 1.35% |
Current
| Price | $54.85 |
| Market Cap | $52.84B |
| Copart, Inc. engages in the provision of online auctions and vehicle remarketing services. It provides vehicle sellers with a full range of services to process and sell vehicles primarily over the internet through Virtual Bidding Third Generation Internet auction-style sales technology. The firm sells the vehicles principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, and exporters and at certain locations, as well as to the general public. The company’s services include online seller access, salvage estimation services, estimating services, end-of-life vehicle processing, virtual insured exchange, transportation services, vehicle inspection stations, on-demand reporting, DMV processing, and vehicle processing programs. It operates through the United States and International segments. Copart was founded by Willis J. Johnson in 1982 and is headquartered in Dallas, TX. |
Publicly traded companies mentioned herein: Copart Inc (CPRT), Openlane Inc (KAR), RB Global Inc (RBA)
Highlights
The presenter is short shares of Copart Inc (CPRT), the market leader in the automotive salvage auction industry, which is effectively a duopoly between CPRT (55% market share) and IAA (30% market share) with small independents making up the remainder. When drivers get into accidents, their insurance companies decide whether it’s cheaper to fix or scrap the car; in the latter case, the cars are then sent to CPRT or its competitors who auction them off to scrap yards or buyers in international markets with less stringent regulations. The business has experienced mid-teen% organic revenue growth over the past 8 years and its earnings multiple has expanded from the low-20x range to >30x over that span. However, the presenter argues that the stock is now trading at peak valuation and peak growth, and he believes every component of its growth algorithm (number of accidents, total loss rate, CPRT’s market share of total losses, and pricing/take rate on auction sales) is impaired going forward. This impairment doesn’t seem to be modeled by the Street, which models HSD% – LDD% annual growth over the long term. As the company misses on growth expectations, the stock can derate meaningfully, creating material downside from the current $50 share price.
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