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CarMax Inc KMX

Morningstar Rating
$87.11 +0.13 (0.15%)
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Company Report

CarMax Will Keep Battling Expensive Inventory Procurement and Consumer Affordability in Fiscal 2024

CarMax's revenue has increased at a compound annual rate of about 12.5% since fiscal 2000 because of the success of customer-friendly sales practices and use of information technology. The firm targets fiscal 2026 revenue between $33 billion and $45 billion with over 5% zero to 10-year-old vehicle market share by end of calendar 2025, up from 4% in 2022. Competing dealerships have tried no-haggle pricing and failed because their salesforces are trained to focus on selling vehicles that earn the highest possible gross profit rather than vehicles that customers actually want or need. A traditional dealership relies on profits from service to offset the typically lower margins it gets on new-vehicle sales. CarMax does not hire salespeople from the auto industry, and salespeople receive the same commission regardless of the vehicle sold. They do not even know the profit on the vehicle sold. The CarMax customer stays with the same salesperson throughout the transaction rather than being passed off to a finance department, receiving a buying experience that is hard to match at a dealership. This focus on customer satisfaction, combined with scale advantages that allow for a wide inventory selection and extensive pricing data, creates a narrow economic moat.

Price vs Fair Value

KMX is trading at a 36% discount.
Price
$85.78
Fair Value
$719.00
Uncertainty
High
1-Star Price
$638.86
5-Star Price
$17.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

CarMax has increased revenue and profitability at a remarkable rate, and we think it is positioned to gain market share in any environment. Omnichannel helps this story, as it lets consumer have maximum flexibility in their experience.

Bears

CarMax operates in a cyclical industry, and its strong model is not immune to a recession.

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News

Trading Information

Previous Close Price
$86.98
Day Range
$86.9288.22
52-Week Range
$58.2288.22
Bid/Ask
$84.18 / $89.67
Market Cap
$13.76 Bil
Volume/Avg
1.9 Mil / 1.7 Mil

Key Statistics

Price/Earnings (Normalized)
30.35
Price/Sales
0.52
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
0.09%

Company Profile

CarMax sells, finances, and services used and new cars through a chain of about 240 used retail stores. It was formed in 1993 as a unit of Circuit City and spun off into an independent company in late 2002. Used-vehicle sales typically account for about 83% of revenue (78% in fiscal 2023 due to the chip shortage) and wholesale about 13% (20% in fiscal 2023), with the remaining portion composed of extended service plans and repair. In fiscal 2023, the company retailed and wholesaled 807,823, and 585,071 used vehicles, respectively. CarMax is the largest used-vehicle retailer in the U.S. but still estimates that it has only about 4% U.S. market share of vehicles 0-10 years old in 2022. It seeks over 5% share by the end of calendar 2025. CarMax is based in Richmond, Virginia.
Sector
Consumer Cyclical
Industry
Auto & Truck Dealerships
Stock Style Box
Mid Core
Total Number of Employees
35,610

Competitors

Valuation

Metric
KMX
SAH
ABG
Price/Earnings (Normalized)
30.358.367.24
Price/Book Value
2.282.171.48
Price/Sales
0.520.140.33
Price/Cash Flow
11.025.455.53
Price/Earnings
KMX
SAH
ABG

Financial Strength

Metric
KMX
SAH
ABG
Quick Ratio
0.390.240.21
Current Ratio
2.451.101.06
Interest Coverage
−0.372.395.84
Quick Ratio
KMX
SAH
ABG

Profitability

Metric
KMX
SAH
ABG
Return on Assets (Normalized)
2.18%4.76%7.99%
Return on Equity (Normalized)
10.04%27.88%22.03%
Return on Invested Capital (Normalized)
−0.45%8.25%11.45%
Return on Assets
KMX
SAH
ABG
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