Copart Inc (CPRT)

Conclusion

Copart runs online auctions and remarketing of vehicles, mainly in the United States, with operations in the United Kingdom, Canada, Germany, Brazil and several other markets. At 32.45 USD on 2026-11-09, the market capitalisation is 30.1 billion USD and the enterprise value is 25.7 billion USD.

The verdict is undervalued. The price-to-earnings ratio is 20.3 against a ten-year median of 31.6, and EV/EBITDA is 12.4 against 21.3. The discounted cash flow gives 30.28 USD per share at a discount rate of 9.91%. The fair value band runs from 33.00 to 49.51 USD with a midpoint of 41.26 USD, a margin of safety of 27.1% at the current price. The fair value from historical multiples is 52.23 USD. The reverse DCF implies growth of 10.3% a year, against revenue growth of 11.6% a year over five years and free cash flow per share growth of 19.3% a year over the same period.

The strongest numbers are ROIC of 31.5% against a WACC of 9.9%, free cash flow conversion of 85.4% over the last twelve months, and net debt to EBITDA of -2.1, meaning net cash. The weakest are the estimate revisions, with the current-year estimate down 3.4% over 90 days, three-year EPS growth of 6.6% a year, and an operating margin of 35.4% against a ten-year median of 36.8%. A sustained fall in margins or a failure of growth to match the 10.3% implied by the price would weaken the case.

Financial health

Financial strength is green, held up by the net cash position, a current ratio of 7.9 and a quick ratio of 7.5. Debt to equity is 0.97%, and the Altman Z-score of 22.5 falls in the safe zone, although that model was designed for manufacturers rather than a service business like Copart. The insolvency risk is low, with a probability of about 0% by the estimate of the Ohlson model. The company does not report its interest expense, so interest coverage is not available. Five-year debt growth was negative, at -41.4%, consistent with a balance sheet that has been shrinking its borrowings.

Earnings quality

Earnings quality is green, with the cash generation and share count supporting the rating. Free cash flow conversion is 85.4% over the last twelve months and 76.5% over five years. The accrual ratio is -1.2%, which means reported earnings are backed by cash. Stock-based compensation is 0.8% of revenue, and free cash flow after it is 1.23 billion USD. The five-year share count change is -0.09% a year, which reflects buybacks. The Piotroski score is 5 out of 8 evaluable tests. The Beneish M-score reading is not available. Copart beat earnings estimates in 4 of the last 8 quarters, with an average surprise of 1.8%. Estimates have been cut: the current year is down 3.4% over 90 days and the next year is down 2.2%, although next-year EPS growth is still estimated at 11.4%.

Profitability

Profitability is green, driven by a return on capital well above the cost of capital. ROIC is 31.5% against a WACC of 9.9%, a ROIC minus WACC of 21.6%. Margins are close to their ten-year medians: gross margin is 44.7% against 45.0%, operating margin 35.4% against 36.8%, and net margin 31.8% against 31.8%. Operating margin stability is 8.1%. Return on equity is 16.3%, and the DuPont split shows it is not inflated by leverage: net margin 31.8%, asset turnover 0.47 and an equity multiplier of 1.10.

Growth

Growth is green, with revenue rising in each of the last ten years. Revenue compound growth is 6.4% over three years, 11.6% over five years and 13.9% over ten years. EPS compound growth is 6.6% over three years, 9.8% over five years and 18.8% over ten years. Free cash flow per share grew 14.7% a year over three years, 19.3% over five and 23.4% over ten. The recent slowdown in three-year EPS growth is the main point to watch against the stronger longer-term record.

Valuation

Valuation is green, reflecting a price below its own history on every multiple. The price-to-earnings ratio is 20.3 against a ten-year median of 31.6, a premium of -35.8%. EV/EBITDA is 12.4 against 21.3, a premium of -41.7%. Price to free cash flow is 23.7 against 51.3, and price to book is 3.3 against 7.2. The free cash flow yield is 4.2%. The discounted cash flow gives 30.28 USD per share using a discount rate of 9.91%, with 55.0% of the value in the terminal estimate. The fair value band of 33.00 to 49.51 USD is built on fixed assumptions, including a 5% equity risk premium and capped long-term growth, and is not a price target. The company pays no dividend, so the dividend yield is 0%.

Risks

The weakest numbers would hurt the company in specific ways. Falling estimates would signal lower earnings ahead, and a slowdown from the 6.6% three-year EPS growth would challenge the 10.3% growth implied by the price. An operating margin below its 36.8% median would reduce the cash flow on which the valuation rests. Terminal value makes up 55.0% of the discounted cash flow, so the result is sensitive to the long-term assumptions. The cost of debt is an assumption rather than a reported figure, and the company does not report its interest expense, so interest coverage cannot be assessed. The Beneish M-score is not available. This analysis has no debt maturity schedule and no revenue split by segment or region, so it cannot show how exposed the company is to individual markets or refinancing dates.