Shares of Copart (CPRT -2.83%), which runs online auctions for automobiles approaching (or at) their end of life, including for spare parts, slumped 4.1% through 2 p.m. ET Friday despite the company reporting better than expected earnings in its fiscal fourth-quarter 2025 report last night.
Heading into earnings, analysts forecast Copart to earn $0.36 per share on $1.14 billion in sales for the quarter ended July 31. The company actually earned $0.41 per share, albeit sales were only $1.13 billion.
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Copart Q4 earnings
These were anything but bad numbers. Copart grew its sales a solid 5% year over year, while increasing profits 24%. However, in the context of a strong fiscal 2025, the sales number may have disappointed investors regardless.
Total sales growth for the full year approached 10%, so the Q4 growth rate slowed by half. On the plus side, earnings for the full year -- $1.59 per share -- grew only 14% in comparison to fiscal 2024. The Q4 profits growth was much stronger than seen earlier in the year.
Is Copart stock a buy?
Even so, it's hard to argue Copart stock is much of a buy at present. Priced at 33 times earnings, the annual growth rate of 14% looks too slow to justify the stock's valuation. Worse, free cash flow at the company is only $1.2 billion, or roughly 20% less than reported earnings.
Valued on free cash flow, that means Copart is selling for closer to a 40x multiple. Even were Copart able to maintain the growth rate seen in Q4, that would be expensive. But in fact, most analysts who follow the stock agree Copart's long-term growth rate is going to be closer to what we saw over the rest of fiscal 2025 -- about 13%.
At its current price, Copart simply costs too much.
