Research

KMX – Market expectations are for Uniform ROA to improve, but management may be concerned about pricing, their used car sales, and their general value proposition

November 20, 2020
  • CarMax, Inc. (KMX:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 35.4x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about pricing, used unit sales, and their general value proposition
  • Specifically, management may lack confidence in their ability to improve used unit comp growth and sustain price levels through digital auctions. They may also have concerns about traditional auctions not opening back up, the potential of their photo studios, and the capabilities of their customer hub. Moreover, management may lack confidence in their ability to remain competitive in the market, upgrade the content on their website, and benefit from investments in other parts of the business. Finally, they may have concerns about the impact of mix shift related to older vehicles sales