Shares of leading online vehicle auction platform Copart (NASDAQ: CPRT) were down 12% as of noon ET Friday, according to data provided by S&P Global Market Intelligence.
Copart reported earnings on Friday and delivered sales and earnings per share growth of 8%. This top-line figure missed analysts’ expectations, and the stock sold off as a result.
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Trading at 43 times earnings prior to the report, Copart was priced with the lofty expectation that it’d continue growing sales by its historical double-digit average, and came up just shy.
Copart still trades at a premium — but rightfully so
Whether it’s an end-of-life vehicle auctioned off to a salvage yard, an insurer selling a totaled car to a dealer for repairs, or a rental car company removing older vehicles from its fleet, Copart is the leading matchmaker in its niche.
Since going public in 1994, Copart has become a 398-bagger, generating an annualized total return of 21%.
Image source: Getty Images.
It is essential to keep these returns in mind before fretting over 90 days’ worth of disappointing data that may merely reflect the uncertainty in the macroeconomic environment.
In fact, management believes certain factors, like tariffs, could help its business, stating:
We think the repair path will become relatively less attractive in comparison to the total loss path by virtue of the tariffs. That said, overwhelmingly, the conclusion is for now that there’s tremendous uncertainty.
If replacement parts cost more from tariffs, insurers are more likely to deem a car “totaled” after a wreck, choosing Copart’s auction services rather than paying to repair the vehicle.
Still trading at 36 times earnings, Copart isn’t cheap, but its leadership position and track record of success have me interested in buying more of the company’s shares after today’s drop.
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Josh Kohn-Lindquist has positions in Copart. The Motley Fool has positions in and recommends Copart. The Motley Fool has a disclosure policy.
