Automotive salvage operator Copart
What Fools say
The analysts tracked on Motley Fool CAPS are a bullish bunch when it comes to Copart, with all of them giving it the thumbs-up for outperforming the market.
Not surprising, really. The auto parts business is counter-cyclical: When you're feeling financially pressured, you're more likely to repair your car than buy a new one, and salvage yards remain an important source for spare parts. That's also been a boon for used parts seller LKQ
Copart commands 35% of the salvage market, but faces some bigger, privately held rivals like ADESA, Auction Broadcasting, and Insurance Auto Auctions. Here's how CAPS members pair Copart up against some other parts sellers.
|
Stock |
Market Cap |
P/E Ratio |
CAPS Rating (5 stars max) |
|---|---|---|---|
|
Copart |
$3.7 billion |
25.9 |
***** |
|
LKQ |
$2.4 billion |
23.7 |
***** |
|
AutoZone |
$8.3 billion |
13.8 |
*** |
|
Advance Auto Parts |
$3.8 billion |
15.7 |
*** |
|
O'Reilly Automotive |
$3.8 billion |
16.8 |
**** |
|
Pep Boys |
$317 million |
NA |
** |
That dovetails nicely with CAPS members; 98% of those weighing in rate it an outperform. "(CEO) Wills loves what he does; loves doing more of it and doing it well," says CAPS member Cressida. "Sounds like Buffett doesn't it.....conferance call with Wills very credbile and rational."
What management does
While revenues have been steadily growing, margins have been squeezed of late because of its relatively new business in the United Kingdom, though even there it saw margins widen last quarter.
|
|
01/07 |
04/07 |
07/07 |
10/07 |
01/08 |
04/08 |
|---|---|---|---|---|---|---|
|
Gross |
46.50% |
47.50% |
47.60% |
46.80% |
44.70% |
41.90% |
|
Operating |
35.20% |
36.10% |
36.20% |
34.80% |
33.00% |
30.90% |
|
Net |
23.20% |
24.10% |
24.30% |
23.40% |
22.10% |
20.90% |
|
FCF/Revenue |
14.50% |
12.80% |
16.60% |
16.90% |
11.60% |
11.80% |
One Fool says
Copart has been building its business smartly despite what has been a calamitous time for others. Acquiring scrap yards, buying back shares at opportune times, and building out one of its key competitive advantages -- the VB2 online auction program -- makes the company an attractive pick for the long term.
However, short-term emerging driving trends may hinder performance in the near future. With higher gasoline costs, the number of miles driven has been falling. Further, drivers are becoming more mindful of the speeds at which they travel. According to the University of Michigan Transportation Research Institute, the number of fatal accidents dropped 3.3% in 2007. For drivers, this is a fortunate scenario. But for Copart, this means fewer salvageable vehicles available.
Still, there are roughly 3 million totaled cars available for salvage each year, so a slight decrease in the number of accidents doesn’t exactly mean the supply is ready to dry up just yet.
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