Shareholders of Copart would probably like to forget the past six months even happened. The stock dropped 33.5% and now trades at $27.30. This 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 Copart?
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
A company’s long-term sales performance can indicate its overall 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 exceptional 13.4% compounded annual growth rate over the last five years. Its growth beat the average business services company and shows its offerings resonate with customers.
2. 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 24.3% over the last five years.
3. Stellar ROIC Showcases Lucrative Growth Opportunities
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Copart’s five-year average ROIC was 31.8%, placing it among the best business services companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.
Final Judgment
These are just a few reasons why we think Copart is a great business. After the recent drawdown, the stock trades at 16.8× forward P/E (or $27.30 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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