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Bear of the Day: Copart (CPRT)
Despite Copart’s (CPRT - Free Report) favorable growth as an online auction provider for salvaged and clean-vehicle titles, the company may be overvalued at current levels.
This comes as Copart has faced the near-term pressures of higher operating costs which has been attributed to volatile used car prices along with supply chain disruptions. Emphasizing such is that Copart’s stock lands a Zacks Rank #5 (Strong Sell) at the time of this writing and the Bear of the Day.
Recent Earnings Miss
Taking away from optimism in regards to Copart’s bottom line expansion is that the company recently missed its fiscal fourth quarter earnings expectations earlier in the month. Copart reported Q4 EPS of $0.33, missing estimates of $0.37 a share by nearly -11%. This was also a slight decrease from EPS of $0.34 in the comparative quarter.
Notably, Copart has missed the Zacks EPS Consensus in two of its last four quarterly reports posting an average earnings surprise of -1.91%.
Image Source: Zacks Investment Research
Furthermore, earnings estimate revisions for Copart’s current fiscal 2025 have fallen -4% in the last 30 days although FY26 EPS estimates are slightly higher.
Image Source: Zacks Investment Research
Copart’s Stretched Valuation
Sounding the alarm on the declining EPS estimates for Copart’s FY25 is that CPRT trades over $50 and at a 33.8X forward earnings multiple. Although Copart is expecting 10% annual EPS growth in FY25 and FY26 this is a noticeable premium to its Zacks Business Services sectors 28.6X and the S&P 500’s 24.3X.
Image Source: Zacks Investment Research
Bottom Line
At current levels investors may want to be cautious of Copart’s stock despite the company’s favorable growth trajectory. For now, there are better options to invest in among business service providers.