Investment Thesis
Copart demonstrates exceptional operational excellence with a 36% operating margin and fortress balance sheet featuring $5.1B cash, zero debt, and a 10x current ratio. The company generates robust free cash flow of $485.1M (21.3% margin) with 9.7% revenue growth and 13.6% EPS growth, indicating strong fundamental momentum and capital efficiency.
Strengths
- Exceptional profitability with 36.0% operating margin and 33.1% net margin, indicating dominant market position and operational leverage
- Fortress balance sheet with $5.1B cash, zero long-term debt, and 0.00x debt-to-equity ratio providing maximum financial flexibility
- Strong cash generation with $485.1M free cash flow and 21.3% FCF margin demonstrating capital-efficient business model
- Revenue growth acceleration (9.7% YoY) combined with EPS growth of 13.6% YoY shows operational leverage and improving profitability
- Exceptional liquidity metrics (10.06x current ratio, 9.99x quick ratio) with minimal working capital needs
Risks
- Low gross margin of 11.0% limits profitability per unit despite high operating margins, indicating heavy reliance on operational efficiency
- ROE of 7.7% and ROA of 7.1% suggest limited return on equity despite strong absolute profitability; capital may be underdeployed
- Cyclical exposure to auto market and economic conditions could pressure volumes during downturns despite strong current performance
- Limited insider activity (3 Form 4 filings in 90 days) may indicate limited management stock purchases at current levels
Key Metrics to Watch
- Revenue growth rate sustainability and volume trends in auto remarketing market
- Operating margin expansion or contraction relative to current 36% level
- Free cash flow generation consistency and capital allocation decisions
- Return on equity improvement through capital deployment or buyback programs
Financial Metrics
Revenue
2.3B
Net Income
754.4M
EPS (Diluted)
$0.77
Free Cash Flow
485.1M
Total Assets
10.6B
Cash
5.1B
Profitability Ratios
Gross Margin
11.0%
Operating Margin
36.0%
Net Margin
33.1%
ROE
7.7%
ROA
7.1%
FCF Margin
21.3%
Balance Sheet & Liquidity
Current Ratio
10.06x
Quick Ratio
9.99x
Debt/Equity
0.00x
Debt/Assets
7.4%
Interest Coverage
40.50x
Long-term Debt
0.0
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-03-22T21:32:12.736787 |
Data as of: 2026-01-31 |
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