Title: Why Copart's Stock Surged an Impressive 23% Last Month
Copart's stock soared a jaw-dropping 23.2% in November, according to data from S&P Global Market Intelligence. Known for its consistent performance on the stock market, Copart's shareholders rarely offload their shares, making even minor positive news ignite a flurry of buyers. And that's exactly what happened last month.
On 21st November, Copart shared its fiscal first-quarter 2025 results, which ended on 31st October. The revenue surged an impressive 12% year-on-year to $1.15 billion, marking a new high and its best growth rate in over a year. While the company's gross profit and net income growth rates were more modest (up 10% and 9% respectively), they still fell within analysts' expectations. Hence, the upbeat earnings led to heightened price targets from financial analysts and drove Copart's shares to all-time highs.
Copart's Business Model
When accidents occur or natural disasters strike, insurance companies have to take action. In the case of totaled vehicles, they turn to companies like Copart to dispose of the debris. In fiscal 2024, 81% of the vehicles Copart sold came from insurance companies.
The first quarter was not without challenges as back-to-back hurricanes in Florida complicated vehicle retrieval. Nevertheless, Copart managed to carry out its duties effectively. Copart typically doesn't acquire damaged vehicles themselves; instead, they oversee the logistics of marketing and selling these vehicles on behalf of insurance companies. Consequently, most of Copart's revenue comes from higher-margin value-added services.
Although Copart's profit margins dipped slightly in Q1, the company's high profit margins meant that this shortfall did not significantly alarm investors.
Should You Still Buy Copart Stock?
The burning question in investors' minds is whether Copart stock remains a viable buy at its all-time highs. The valuation remains the primary concern. Copart trades at a price-to-sales (P/S) ratio of 14, matching only one other occasion in its history - right before a 30% plunge in late 2021.
However, Copart boasts strong status as a high-quality business on the stock market. Even if you bought during its peak valuation in late 2021, you still outperformed the S&P 500. Investors may benefit from dollar-cost averaging positions at high valuations and buying larger stakes during periods of lower valuations.
Investors choosing to avoid Copart stock until it's deemed 'cheap' risk missing out on market-beating returns, thanks to Copart's consistent history of compounding returns.
Based on Copart's strong financial performance, investors might consider reinvesting their money in the company. The impressive Q1 earnings, including a 12% increase in revenue, have led to heightened price targets from financial analysts.
Furthermore, Copart's business model, focused on disposing of totaled vehicles for insurance companies and providing value-added services, has proven to be financially rewarding, even in challenging situations like hurricanes.