Copart’s Earnings: Slightly Less Than Expected

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Copart (CPRT 4.89%), the company that rather expertly sorts through the aftermath of vehicular mishaps (and occasionally, one suspects, the dreams of automotive designers), experienced a minor gravitational adjustment in its stock price today. A fall of 4.5% by 11:30 a.m. ET, to be precise. The cause? A slightly underwhelming earnings report. It’s a reminder, really, that even in a universe teeming with improbable events, the market generally frowns upon figures that don’t quite meet expectations. (Which, when you think about it, is rather illogical. Shouldn’t we be celebrating the fact that anything is accurately predicted in a system this complex?)

Analysts, those individuals who bravely attempt to predict the future based on the past (a practice roughly equivalent to navigating by looking in the rearview mirror), anticipated earnings of $0.39 per share on sales of $1.15 billion. Copart, however, managed $0.36 per share on $1.12 billion. A difference, admittedly, that wouldn’t fund a particularly lavish interstellar vacation, but enough to trigger a ripple of disappointment among those who deal in such things.

Copart Q2 Earnings: A Statistical Dip

The numbers reveal a 4% year-over-year decline in revenue for Q2. This translated into a 10% decrease in per-share profit, a trend that began in the previous quarter. Year-to-date, sales are down 1%, and earnings are, shall we say, holding steady – at $0.77 per share. (One wonders if “holding steady” is merely a polite way of saying “not actively plummeting.” It’s a subtle distinction, but important in the world of financial reporting.)

But before you reach for the panic button (assuming you have a panic button, which is always a good idea), there’s a curious anomaly. Copart’s free cash flow has experienced a rather significant upswing. While operating cash flow remained largely unchanged at $662.8 million, the company drastically reduced its purchases of property and equipment – by nearly half, to a mere $177.7 million. This resulted in a robust $485.1 million in free cash flow so far this year, and a projected $970 million by year’s end. (It’s a bit like deciding you don’t need that extra wing on the spaceship. Saves a fortune, but slightly limits your intergalactic range.)

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Is Copart Stock a Buy? A Question for the Ages (and Your Broker)

Copart’s management, in a display of admirable restraint, offered minimal guidance. Assuming they do hit that projected free cash flow mark, the stock would trade at a price-to-free cash flow ratio of 37.4. Subtracting the rather substantial $5.1 billion in net cash on the balance sheet brings that EV/FCF ratio down to a more palatable 32.1. (It’s a bit like realizing you’ve been carrying around a small fortune in your pocket without realizing it. Suddenly, everything looks more affordable.)

Calling the stock a “buy” at this valuation feels… optimistic. Profits are flat, revenues are declining. However, it’s undeniably getting cheaper. And significantly cheaper than it was a year ago. (Which, when you consider the relentless march of time and the general tendency of things to become more expensive, is a small victory in itself.) So, is it a buy? That, dear reader, is a question best left to your broker, your gut feeling, and perhaps a carefully consulted magic eight ball.

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2026-02-20 19:52