Company Reports

Copart’s fiscal 2024 third quarter again showed strong growth and solid profitability, a byproduct of the firm’s wide economic moat enabling share gain and falling used vehicle prices. This increased the insurance industry’s total loss frequency, which means more auction volume for Copart.

Since its 1982 inception, Copart has grown into the largest online salvage vehicle auction operator in the United States, connecting buyers and sellers around the world. The company has grown its top line nearly five-fold since 2009 due to a combination of significant land expansion and robust service quality to drive higher salvage vehicle volume. Copart receives the majority of its vehicle volume through contracts with large auto insurers and sells them on consignment for high margins. The company prioritizes maintaining amicable insurance relationships which are fostered by having adequate storage capacity (even after storms) and providing flexible service. All auctions have been online since 2003.

Since its 1982 inception, Copart has grown into the largest online salvage vehicle auction operator in the United States, connecting buyers and sellers around the world. The company has grown its top line nearly five-fold since 2009 due to a combination of significant land expansion and robust service quality to drive higher salvage vehicle volume. Copart receives the majority of its vehicle volume through contracts with large auto insurers and sells them on consignment for high margins. The company prioritizes maintaining amicable insurance relationships which are fostered by having adequate storage capacity and being a flexible service provider. All auctions have been online since 2003.

Copart’s fiscal 2024 second quarter was solid, in our view, and showed no weak areas. Diluted EPS rising 10% year over year to $0.33 missed the $0.35 LSEG consensus, sending the stock down over 4% in Feb. 22 after-hours trading. We think consensus was just too aggressive rather than Copart failing to execute, and we raise our fair value estimate to $47 from $45 on the time value of money and a slightly lower fiscal 2024 share count on how it’s tracking so far in fiscal 2024.

Since its 1982 inception, Copart has grown into the largest online salvage vehicle auction operator in the United States, connecting buyers and sellers around the world. The company has grown its top line nearly five-fold since 2009 due to a combination of significant land expansion and robust service quality to drive higher salvage vehicle volume. Copart receives the majority of its vehicle volume through contracts with large auto insurers and sells them on consignment for high margins. The company prioritizes maintaining amicable insurance relationships which are fostered by having adequate storage capacity and being a flexible service provider. All auctions have been online since 2003.

Copart started fiscal 2024 with a strong quarter, with EPS of $0.34 up 36% year over year, beating the Refinitiv consensus by a penny. We raise our fair value estimate to $45 from $42 on a higher long-term operating income growth rate than previously modeled and from raising our fiscal 2024 operating margin expectation. First-quarter’s mark of 38.7%, up 380 basis points, beat our full-year projection of 37%, so we now model slightly more than 38%. Our midcycle operating margin is now 120 basis points higher at 40.2% to capture the power of Copart’s wide moat enabling more auction volume and scale over time.

Since its 1982 inception, Copart has grown into the largest online salvage vehicle auction operator in the United States, connecting buyers and sellers around the world. The company has grown its top line nearly five-fold since 2009 due to a combination of significant land expansion and robust service quality to drive higher salvage vehicle volume. Copart receives the majority of its vehicle volume through contracts with large auto insurers and sells them on consignment for high margins. The company prioritizes maintaining amicable insurance relationships which are fostered by having adequate storage capacity and being a flexible service provider. All auctions have been online since 2003.

Since its inception in 1982, Copart has grown into the largest online salvage vehicle auction operator in the United States, connecting buyers and sellers from around the world. The company has grown its top line nearly five-fold since 2009 due to a combination of significant land expansion and robust service quality to drive higher salvage vehicle volume. Copart receives the majority of its vehicle volume through contracts with large auto insurers and sells them on consignment for high margins. Therefore, the company prioritizes maintaining amicable insurance relationships which are fostered by having adequate storage capacity and being a flexible service provider. All auctions have been online since 2003.

Copart’s fourth-quarter fiscal 2023 results gave us no reason to change our investment thesis or fair value estimate, but we will reassess all valuation inputs when we roll our model forward for the soon-to-be filed 10-K. We consider Copart an outstanding-quality business and its wide moat helps the firm consistently generate share gains and profit growth. Fourth-quarter adjusted diluted EPS grew 21.4% year over year to $0.34 beating the $0.32 Refinitiv consensus. A nearly 10% increase in global unit volume (about 8% United States and 22% internationally) helped drive revenue up 12.9% to $997.6 million which also beat the Refinitiv consensus of $962.9 million. Foreign currency was a $6 million tailwind for the quarter. This growth, along with declines in some costs such as transportation due to falling diesel prices, enabled strong operating leverage with operating income up 20.3% and operating margin growing by 240 basis points to 39.2%.

Since its inception in 1982, Copart has grown into the largest online salvage vehicle auction operator in the United States, connecting buyers and sellers from around the world. The company has grown its top line nearly five-fold since 2009 due to a combination of significant land expansion and robust service quality to drive higher salvage vehicle volume. Copart receives the majority of its vehicle volume through contracts with large auto insurers and sells them on consignment for high margins. Therefore, the company prioritizes maintaining amicable insurance relationships which are fostered by having adequate storage capacity and being a flexible service provider. All auctions have been online since 2003.

We are initiating coverage on salvage vehicle auctioneer Copart with a wide moat and a $77 fair value estimate. We see the firm as a phenomenal business with only one large competitor in IAA, which RB Global (formerly Ritchie Bros.) acquired in March. Copart operates vehicle auctions after vehicles are declared totaled, providing an online-only marketplace that optimizes liquidity for sellers, primarily insurance companies, and buyers such as dismantlers, used vehicle retailers, exporters, and private individuals. This highly liquid marketplace helps create a network effect as sellers benefit from a wide buyer network due to increased bidding competition, and buyers benefit from higher vehicle volumes.

Since its inception in 1982, Copart has grown into the largest online salvage vehicle auction operator in the United States, connecting buyers and sellers from around the world. The company has grown its top line nearly five-fold since 2009 due to a combination of significant land expansion and robust service quality to drive higher salvage vehicle volume. Copart receives the majority of its vehicle volume through contracts with large auto insurers and sells them on consignment for high margins. Therefore, the company prioritizes maintaining amicable insurance relationships which are fostered by having adequate storage capacity and being a flexible service provider. All auctions have been online since 2003.