Investment Thesis
Copart demonstrates exceptional financial health with zero debt, fortress liquidity (7.6x current ratio), and outstanding profitability (36.5% operating margin, 32.9% net margin). However, net income growth (+0.3% YoY) severely lags revenue growth (+9.7% YoY), signaling margin compression or expense growth concerns that warrant monitoring despite strong fundamental positioning.
Strengths
- Exceptional balance sheet with zero long-term debt and $3.4B cash (35% of equity)
- Outstanding profitability metrics: 36.5% operating margin and 32.9% net margin with high-quality earnings (OCF matches NI)
- Strong free cash flow generation of $988.4M with 28.1% FCF margin, indicating robust capital returns potential
- Double-digit revenue growth (+9.7% YoY) demonstrates market demand and business expansion
- Superior liquidity with 7.61x current ratio and 7.54x quick ratio
Risks
- Revenue growth (+9.7%) significantly outpaces net income growth (+0.3%), indicating margin compression or rising operational costs
- Low gross margin of 7.1% leaves minimal room for error or unexpected cost increases
- Cyclical exposure to auto market; economic slowdown would directly impact salvage volumes
- Operating leverage working in reverse despite scale growth suggests cost discipline or efficiency challenges
Key Metrics to Watch
- Net income growth trajectory and operating expense ratio trends relative to revenue growth
- Gross margin sustainability and cost of revenue dynamics
- Free cash flow conversion rate and capital allocation decisions
Financial Metrics
Revenue
3.5B
Net Income
1.2B
EPS (Diluted)
$1.20
Free Cash Flow
988.4M
Total Assets
9.6B
Cash
3.4B
Profitability Ratios
Gross Margin
7.1%
Operating Margin
36.5%
Net Margin
32.9%
ROE
13.2%
ROA
12.0%
FCF Margin
28.1%
Balance Sheet & Liquidity
Current Ratio
7.61x
Quick Ratio
7.54x
Debt/Equity
0.00x
Debt/Assets
8.9%
Interest Coverage
63.45x
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: 2026-05-30T07:35:07.161789 |
Data as of: 2026-04-30 |
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