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CarMax Inc KMX

Morningstar Rating
$71.63 +0.27 (0.38%)
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Company Report

CarMax Earnings: Affordability Struggles Continue, but Finance Arm's Expansion a Good Move Long Term

CarMax's fiscal 2025 first-quarter results show continued headwinds for consumers around used-vehicle affordability. We are lowering our fair value estimate to $123 per share from $125. The change is from lowering revenue over our five-year explicit forecast period by 2.4% to bring fiscal 2025 and fiscal 2026 projections in line with market conditions and modeling higher overhead costs as a percentage of revenue for these two years.

Price vs Fair Value

KMX is trading at a 627% premium.
Price
$71.63
Fair Value
$326.00
Uncertainty
High
1-Star Price
$125.39
5-Star Price
$81.20
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
$71.36
Day Range
$70.6774.85
52-Week Range
$59.6688.22
Bid/Ask
$70.50 / $73.00
Market Cap
$11.27 Bil
Volume/Avg
5.7 Mil / 2.3 Mil

Key Statistics

Price/Earnings (Normalized)
26.05
Price/Sales
0.44
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
1.29%

Company Profile

CarMax sells, finances, and services used and new cars through a chain of around 250 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 (79% in fiscal 2024 due to the chip shortage) and wholesale about 13% (19% in fiscal 2024), with the remaining portion composed of extended service plans and repair. In fiscal 2024, the company retailed and wholesaled 765,572, and 546,331 used vehicles, respectively. CarMax is the largest used-vehicle retailer in the US but still estimates that it had only about 3.7% US market share of vehicles 0-10 years old in 2023. It seeks over 5% share a few years from now. CarMax is based in Richmond, Virginia.
Sector
Consumer Cyclical
Industry
Auto & Truck Dealerships
Stock Style Box
Mid Core
Total Number of Employees
29,836

Competitors

Valuation

Metric
KMX
AN
ABG
Price/Earnings (Normalized)
26.057.527.28
Price/Book Value
1.822.831.38
Price/Sales
0.440.260.31
Price/Cash Flow
9.455.725.40
Price/Earnings
KMX
AN
ABG

Financial Strength

Metric
KMX
AN
ABG
Quick Ratio
0.340.170.18
Current Ratio
2.260.791.06
Interest Coverage
−0.364.484.90
Quick Ratio
KMX
AN
ABG

Profitability

Metric
KMX
AN
ABG
Return on Assets (Normalized)
2.11%8.24%7.41%
Return on Equity (Normalized)
9.62%43.15%20.85%
Return on Invested Capital (Normalized)
−0.45%12.50%10.91%
Return on Assets
KMX
AN
ABG
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