Copart
CPRT
$32.76
-0.70%
Copart Inc. operates a leading online salvage vehicle auction platform, facilitating over 4 million transactions annually across 11 countries in North America, Europe, and the Middle East. The company is a dominant market leader in the specialty business services industry, distinguished by its proprietary VB3 virtual bidding platform that connects a vast network of vehicle sellers, primarily insurance companies, with a global base of registered buyers. The current investor narrative centers on growth challenges, as evidenced by recent quarterly revenue declines and a significant stock price drop following its Q2 2026 earnings report, which has shifted the debate towards the sustainability of its core business model amid potential cyclical headwinds in the auto insurance and used vehicle markets.…
CPRT
Copart
$32.76
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Investment Opinion: Should I buy CPRT Today?
Rating & Thesis: Hold. Copart is a high-quality company in a cyclical downturn, where deteriorating fundamentals (revenue decline, margin compression) are balanced against a derated valuation and a fortress balance sheet, suggesting the risk/reward is balanced for now. The mixed analyst stance, with recent actions including an 'Underweight', 'Neutral', and 'Outperform', reflects this uncertainty and the lack of a clear catalyst.
Supporting Evidence: The stock trades at a forward P/E of 19.88x, which is a 29% discount to its trailing P/E, implying the market expects significant EPS growth. However, recent fundamentals contradict this optimism: Q2 revenue fell 3.58% YoY, and gross margin compressed 255 basis points sequentially. Positively, the company's financial health is exceptional, with a debt-to-equity ratio of 0.011 and $1.41B in TTM FCF, providing a buffer. The stock is also deeply oversold, trading just 3.8% above its 52-week low after a 41.88% annual decline.
Risks & Conditions: The two biggest risks are a continuation of the revenue decline beyond the next quarter and further margin erosion below 30% net margin. This Hold rating would upgrade to a Buy if the company demonstrates sequential revenue stabilization and halts margin compression in the next earnings report, confirming the downturn is shallow. It would downgrade to a Sell if revenue decline accelerates beyond 5% YoY or net margin falls below 30%. Relative to its own history, the stock is fairly valued at the lower end of its range, but the premium multiple remains vulnerable until growth resumes.
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CPRT 12-Month Price Forecast
The outlook for Copart is clouded by near-term fundamental deterioration but supported by a valuation that has priced in significant bad news. The base case of a prolonged period of stagnation is most likely, as the company's dominant model is resilient but not immune to cyclical pressures. The stock is likely to remain range-bound until concrete evidence of a fundamental inflection point emerges. The stance would turn bullish on confirmation of revenue stabilization and margin resilience in the next 1-2 quarters. It would turn bearish if the current downtrend in both top-line and profitability metrics accelerates.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Copart's 12-month outlook, with a consensus price target around $42.59 and implied upside of +30.0% versus the current price.
Average Target
$42.59
3 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
3
covering this stock
Price Range
$26 - $43
Analyst target range
Analyst coverage for Copart appears limited, with only three analysts providing estimates for future EPS and revenue, and no consensus price target or recommendation data provided in the dataset. The estimated EPS range for the forward period is $1.78 to $1.90, with an average of $1.83, while estimated revenue averages $5.15 billion. The lack of a published price target consensus and the low analyst count typically indicates this may be a company with stable, predictable operations that attracts less frequent coverage updates, or it could suggest limited institutional interest in providing new targets amidst the current fundamental uncertainty. The available institutional ratings from recent months show a mixed but generally cautious stance, with actions including an 'Underweight' from Barclays, a 'Neutral' from JP Morgan, and an 'Outperform' from Baird, all of which were reiterations of existing ratings. The most recent rating change was an upgrade from HSBC to 'Buy' from 'Hold' in September 2025. The absence of a clear target range and the reiteration of existing views signal that analysts are likely in a 'wait-and-see' mode, awaiting clearer signs of a fundamental turnaround before revising their outlooks, which contributes to the stock's high uncertainty and wide trading range.
Bulls vs Bears: CPRT Investment Factors
The investment debate for Copart is a classic clash between deteriorating fundamentals and a deeply discounted valuation. The bear case currently holds stronger near-term evidence, anchored by concrete revenue contraction of 3.58% YoY and sequential margin compression. However, the bull case is supported by an exceptionally strong financial position and a valuation that has already derated significantly from historical highs. The single most important tension is whether the current revenue decline is a temporary cyclical downturn or the beginning of a structural challenge to Copart's core business model. The resolution of this question, evidenced by stabilization or further deterioration in the next quarter's top-line and margin figures, will dictate the stock's direction.
Bullish
- Extremely Strong Financial Health: Copart has a fortress balance sheet with a minimal debt-to-equity ratio of 0.011 and a high current ratio of 8.25, providing significant financial flexibility. The company generated $1.41 billion in TTM free cash flow, enabling it to weather downturns and fund growth without external financing.
- High Profitability Despite Pressure: The company maintains robust profitability with a net margin of 31.27% and an operating margin of 34.65% in its latest quarter. While margins have compressed from recent peaks, these levels remain exceptionally high for an industrial services company, indicating a durable competitive moat.
- Valuation Derated to Historical Lows: The stock's trailing P/E of 28.19x is significantly below its historical P/E of 36.26x from Q3 FY2025, representing a 22% compression. Trading just 3.8% above its 52-week low of $32.20, the market has priced in substantial pessimism, potentially offering a margin of safety.
- Dominant Market Position & Platform: Copart is the dominant leader in its niche, facilitating over 4 million transactions annually through its proprietary VB3 platform. Its network of over 750,000 registered buyers and reliance on insurance companies for 80% of volume creates significant barriers to entry and a stable, recurring revenue base.
Bearish
- Revenue Contraction & Growth Deceleration: Q2 FY2026 revenue declined 3.58% year-over-year to $1.12 billion, marking a clear multi-quarter downtrend from peaks above $1.21 billion. This challenges the core growth narrative and suggests potential cyclical or structural headwinds in the salvage vehicle market.
- Margin Compression Across Key Metrics: Profitability is eroding: gross margin fell to 43.94% from 46.49% in the prior quarter, and net margin declined to 31.27% from 34.95%. This sequential pressure indicates rising costs or pricing challenges that could threaten the high-margin business model if sustained.
- Severe Negative Price Momentum: The stock is down 41.88% over the past year and 13.20% over the past month, trading near its 52-week low. With a beta of 1.14, it has shown a severe negative relative strength of -64.08% vs. the S&P 500, indicating intense company-specific selling pressure.
- Forward P/E Implies Aggressive Recovery: The forward P/E of 19.88x implies a 29.5% expected EPS growth from trailing figures. This valuation embeds a significant earnings recovery that may be at risk if revenue declines and margin compression persist, leaving the stock vulnerable to further multiple contraction.
CPRT Technical Analysis
The prevailing price trend for Copart is a pronounced and sustained downtrend, with the stock down 41.88% over the past year. As of the latest data, the stock is trading near the bottom of its 52-week range, with a current price of $33.40 compared to a 52-week high of $63.85 and a low of $32.20; this positions it at approximately 3.8% above its 52-week low, suggesting it is deeply oversold and may represent a value opportunity, though it also risks being a 'falling knife' if fundamental deterioration persists. Recent momentum remains negative and aligns with the longer-term downtrend, with the stock down 13.20% over the past month and 11.57% over the past three months, indicating no signs of a near-term reversal and continued selling pressure. The stock's beta of 1.142 indicates it is approximately 14% more volatile than the broader market (SPY), which has gained 22.2% over the past year, highlighting a severe negative relative strength of -64.08% and underscoring significant company-specific or sector-specific risks that investors must account for in position sizing. Key technical support is firmly established at the 52-week low of $32.20, while resistance is far overhead at the 52-week high of $63.85; a decisive breakdown below $32.20 could trigger another leg down, whereas a recovery would first need to overcome the significant downtrend evidenced by the 41.88% annual decline.
Beta
1.14
1.14x market volatility
Max Drawdown
-49.2%
Largest decline past year
52-Week Range
$32-$64
Price range past year
Annual Return
-44.2%
Cumulative gain past year
| Period | CPRT Return | S&P 500 |
|---|---|---|
| 1m | -7.8% | +0.5% |
| 3m | -17.8% | -2.1% |
| 6m | -25.3% | +4.0% |
| 1y | -44.2% | +29.5% |
| ytd | -13.3% | -0.4% |
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CPRT Fundamental Analysis
Copart's revenue trajectory has turned negative, indicating a period of contraction. For the quarter ending January 31, 2026 (Q2 FY2026), revenue was $1.12 billion, representing a year-over-year decline of 3.58%. This follows a sequential decline from $1.16 billion in the prior quarter (Q1 FY2026), and a multi-quarter trend shows revenue has softened from peaks above $1.21 billion in Q3 FY2025, signaling a clear deceleration that challenges the historical growth narrative. The company remains highly profitable with strong margins, but these are showing signs of compression. Net income for the latest quarter was $350.7 million, yielding a robust net margin of 31.27%. However, the gross margin of 43.94% and operating margin of 34.65% have declined from 46.49% and 37.29%, respectively, in the previous quarter, indicating pressure on profitability. The net margin has also retreated from 34.95% in Q1 FY2026, suggesting earnings power is moderating alongside the top-line weakness. Copart exhibits exceptional financial health with a fortress balance sheet and strong cash generation. The company has a minimal debt-to-equity ratio of 0.011, an extremely high current ratio of 8.25, and generated $1.41 billion in trailing twelve-month free cash flow. With an ROE of 16.90% and an ROA of 10.99%, the company is efficiently generating returns on its capital, and its massive cash pile and lack of debt provide ample flexibility to navigate the current downturn, repurchase shares (as seen in recent quarters), and fund growth initiatives internally without reliance on external financing.
Quarterly Revenue
$1.1B
2026-01
Revenue YoY Growth
-0.03%
YoY Comparison
Gross Margin
+0.43%
Latest Quarter
Free Cash Flow
$1.4B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is CPRT Overvalued?
Given Copart's substantial positive net income, the primary valuation metric is the Price-to-Earnings (PE) ratio. The stock trades at a trailing PE of 28.19x and a forward PE of 19.88x based on analyst estimates. The significant gap between trailing and forward multiples implies the market expects a meaningful recovery in earnings, with the forward PE baking in an anticipated 29.5% growth in EPS from the trailing figure. Compared to sector averages, specific industry comparison data is not available in the provided dataset, preventing a quantified premium/discount analysis. However, a trailing PE near 28x for a company experiencing revenue contraction suggests the valuation may not yet fully reflect the growth deceleration, and investors are likely paying for the company's historically high-quality margins and market position. Historically, Copart's own valuation has compressed significantly from recent peaks. The current trailing PE of 28.19x is below the historical PE of 36.26x seen in Q3 FY2025 (as of April 30, 2025) and well below the 39.04x from Q4 FY2024, indicating the market has already derated the stock substantially. Trading nearer to the lower end of its own historical valuation band suggests the market has priced in considerable pessimism, potentially offering a margin of safety if the company can stabilize its fundamentals, but it also reflects the real deterioration in growth prospects observed over recent quarters.
PE
28.2x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 24x~39x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
19.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Copart faces clear financial risks from its decelerating growth and margin compression. Revenue declined 3.58% YoY in Q2 FY2026, and key profitability metrics like gross margin (43.94%) and net margin (31.27%) have fallen sequentially. While the balance sheet is strong, the company's valuation (forward P/E of 19.88x) is predicated on an earnings recovery; failure to stabilize margins or return to revenue growth could trigger further multiple compression. The business also carries concentration risk, with approximately 80% of vehicle volume supplied by auto insurance companies, making it sensitive to trends in auto claims frequency and severity.
Market & Competitive Risks: The primary market risk is valuation compression, as the stock trades at a trailing P/E of 28.19x while experiencing revenue contraction. This premium multiple is vulnerable if growth does not reaccelerate. The stock's beta of 1.142 indicates it is more volatile than the market, and its severe underperformance (-41.88% vs. SPY +22.2% over one year) highlights significant sector-specific concerns. Competitive risks are moderated by Copart's dominant platform and network effects, but any technological disruption to the salvage auction process or a shift in insurance company practices could threaten its market position.
Worst-Case Scenario: The worst-case scenario involves a prolonged downturn in the auto insurance cycle, leading to a sustained decline in total loss vehicles, coupled with continued margin pressure from inflation or competitive fee structures. This could result in consecutive quarters of revenue declines and falling EPS, breaking the forward earnings growth narrative. In this adverse scenario, the stock could re-test and break its 52-week low of $32.20, potentially falling towards a P/E multiple in the low 20s on depressed earnings, implying a realistic downside of 20-25% from the current price near $33.40.
FAQ
The key risks are, in order of severity: 1) Growth Risk: Sustained revenue decline, as evidenced by the 3.58% YoY drop in Q2, challenging the core investment thesis. 2) Profitability Risk: Further margin compression from the current net margin of 31.27%, which would impair earnings power. 3) Valuation Risk: The forward P/E of 19.88x assumes an earnings recovery; if growth doesn't return, the multiple could contract further. 4) Concentration Risk: Dependence on auto insurance companies for ~80% of vehicle supply makes the business sensitive to claims trends.
The 12-month forecast is a range-bound outlook with three scenarios. The base case (60% probability) sees the stock trading between $38 and $45, as the company works through cyclical headwinds with stable margins. The bull case (25% probability) targets $48 to $55 on a successful return to growth and multiple expansion. The bear case (15% probability) warns of a drop to $28-$32 if the revenue decline deepens and margins erode further. The base case is most likely, predicated on the assumption that the current downturn is cyclical but prolonged, not structural.
CPRT's valuation sends mixed signals. Its trailing P/E of 28.19x appears rich for a company in revenue contraction, suggesting it may be overvalued on current fundamentals. However, its forward P/E of 19.88x represents a significant derating from its historical P/E above 36x, implying the market has priced in substantial pessimism. Compared to its own history, the stock is fairly valued at the lower end of its range. The valuation is not cheap, but it is no longer demanding; it fairly reflects a high-margin business experiencing a growth pause.
CPRT presents a nuanced risk/reward profile. For investors seeking a high-quality business at a discounted price, the current level near 52-week lows may be attractive, especially given its fortress balance sheet and strong cash flow. However, with revenue declining 3.58% YoY and margins compressing, it is not a good buy for those seeking near-term growth or momentum. It is a suitable, speculative buy for patient, long-term investors who believe the current downturn is cyclical and temporary, and who are willing to wait for a fundamental turnaround that may take several quarters.
CPRT is unsuitable for short-term trading due to its negative momentum (down 41.88% over the past year) and high uncertainty around near-term fundamentals. Its beta of 1.14 also implies above-market volatility. The stock is best suited for a long-term investment horizon of 3-5 years, allowing time for the business cycle to turn and for the company's durable competitive advantages and strong cash generation to drive shareholder value. The lack of a dividend means returns will be solely dependent on capital appreciation, which requires patience through the current downturn.