Research

CPRT – Markets are pricing in expectations for Uniform ROA to reach new peaks, but management may be concerned about pricing, insurance partners, and the international business

January 4, 2021
  • Copart, Inc. (CPRT:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 36.9x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about used car pricing, insurance partner exclusivity, and international business plans
  • Specifically, management may have concerns about the sustainability of improvements in used car prices, and they might lack confidence in their ability to sustain operating income growth. Moreover, they may have concerns about the coronavirus’s impact on their international plans and the catastrophic business. Furthermore, management may lack confidence in their ability to improve international buyer mix and maintain exclusivity with insurance partners. Finally, they may be exaggerating industry tailwinds in Europe