Apparently, my skepticism about auto-salvage specialist Copart's
Folks, when I write a column about a Fool pick like Copart, when I praise Focus Media
The Motley Fool is not a monolithic organization. Everyone is encouraged to think independently, and to express these thoughts both in private and in public, on these pages. So while I suspect my colleagues over at Stock Advisor were delighted with Wednesday's news, and thrilled at the stock's subsequent 15% Thursday price bump, Yours Fool-y remains as skeptical as ever. Here's why.
Honey, who shrunk the growth story?
First and foremost, Wednesday's numbers just weren't that impressive. Better than upstream in the auto industry, where Ford
As for the subject of my concerns earlier this week, free cash flow, I haven't a clue. Valued on its trailing GAAP earnings, Copart actually looks pretty attractively priced with a 15 P/E and 16% projected growth. Not bad at all -- on the surface.
But what lies beneath?
Regrettably, management continues to disrespect its shareholders, withholding from its earnings releases essential data in the form of its cash flow statement -- a document that, as fellow Fool Bill Mann explained in his classic column: "The Perfect Earnings Report," no self-respecting earnings report should leave home without.
Without that document, we still lack current data on the company's cash profitability. That leaves us still looking at a company that, at last report, was selling for about 28 times its cash profits. Weighed against the expected growth rate, that looks downright expensive.
Copart, I'm a reasonable Fool. What's more, I'm in awe of the smarter folks over at Stock Advisor -- and they all believe in you. I'd love to, too, just as soon as you prove me wrong. Produce the cash flow statement. Prove that you've broken your decade-long streak of reporting higher GAAP earnings than you generate as cash profit.
In short, show me the money.
Further fractious Foolishness:
Focus Media Holding is a Motley Fool Global Gains recommendation and a Motley Fool Rule Breakers pick. 3M is a Motley Fool Inside Value selection. The Fool owns shares of Copart. Try any of our Foolish newsletters today, free for 30 days.