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Why Copart Stock Gained 15.9% in February

By Keith Noonan – Updated Apr 12, 2019 at 5:25PM

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Solid quarterly results helped drive the auction-focused automotive e-commerce stock to double-digit gains last month.

What happened

Copart (CPRT 0.28%) stock climbed 15.9% in February, according to data from S&P Global Market Intelligence. The automotive e-commerce company's shares rose early in the month thanks to momentum for the broader market and then got a boost following better-than-expected quarterly results.

CPRT Chart

CPRT data by YCharts.

Copart published its second-quarter results on Feb. 20, and while slowing sales growth might have raised concerns among some investors, the company's solid earnings performance and a more bullish market won out and propelled the stock's gains last month. 

A gavel next to a miniature car attached to car keys.

Image source: Getty Images.

So what

Copart's second-quarter revenue climbed 5.6% year over year to come in at $484.9 million, which fell short of the average analyst estimate (as polled by Zacks Research) of $494.3 million. However, the company's adjusted earnings per share of $0.52 beat the target by a penny and represented a 10.6% increase compared with the prior-year quarter.

The company is seeing benefits from user gains and increases for the average selling price on its platform, but decelerating revenue growth compared with the sequential quarter highlights the possibility that expansion could settle into proceeding at a slower pace going forward. 

Check out the latest earnings call transcript for Copart.

Now what

Based on current momentum for the automotive e-commerce market, it's reasonable to expect that there's still plenty of untapped opportunity in the space, but Copart isn't the only player. It's also reasonable to expect that the market could get more competitive -- large tech platforms have already made some early moves into the space. 

Copart isn't feeling too much pressure yet and still has avenues to long-term growth, with consumers gradually trending toward online retail, improving technology, and further expansion in European and South American territories. However, the company is also currently valued for strong performance. Shares have nearly tripled over the last three years and trade at roughly 27 times this year's expected earnings. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Copart. The Motley Fool has a disclosure policy.

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