Copart (CPRT)

Online vehicle auction company Copart (NASDAQ:CPRT) missed Wall Street’s revenue expectations in Q3 CY2025, with sales flat year on year at $1.16 billion. Its GAAP profit of $0.41 per share was 3.5% above analysts’ consensus estimates.

Company Overview

Starting as a single salvage yard in California in 1982, Copart (NASDAQ:CPRT) operates an online auction platform that connects sellers of damaged and salvage vehicles with buyers ranging from dismantlers and rebuilders to used car dealers and exporters.

Like in other industries, the shift to online platforms can lower transaction costs and improve liquidity for sellers. Increasing digitization, AI-driven pricing analytics, and automation in logistics can enhance efficiency for operators who invest in technology and software. On the other hand, challenges include potential regulatory scrutiny on auction transparency, data privacy concerns with AI-driven valuation models, and shifting environmental policies that could impact the resale market for internal combustion vehicles. Additionally, supply chain volatility in new car production may create unpredictable swings in used vehicle supply, impacting auction volumes.

Copart's primary competitor is IAA, Inc. (NYSE:IAA), which also operates in the salvage vehicle auction market. Other competitors include KAR Auction Services (NYSE:KAR), which focuses more on whole car auctions, and regional or local salvage auction companies in various markets.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $4.66 billion in revenue over the past 12 months, Copart is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Copart grew its sales at an incredible 15.7% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows Copart’s demand was higher than many business services companies.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Copart’s annualized revenue growth of 7.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

Copart also breaks out the revenue for its most important segment, Service . Over the last two years, Copart’s Service revenue (processing and selling cars) averaged 9.3% year-on-year growth.

This quarter, Copart’s $1.16 billion of revenue was flat year on year, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 7.4% over the next 12 months, similar to its two-year rate. This projection is admirable and implies the market is forecasting success for its products and services.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Copart has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average operating margin of 38.2%.

Looking at the trend in its profitability, Copart’s operating margin decreased by 4.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Copart generated an operating margin profit margin of 37.3%, up 1.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Copart’s EPS grew at an astounding 18.1% compounded annual growth rate over the last five years, higher than its 15.7% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Copart, its two-year annual EPS growth of 9.8% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.

In Q3, Copart reported EPS of $0.41, up from $0.37 in the same quarter last year. This print beat analysts’ estimates by 3.5%. Over the next 12 months, Wall Street expects Copart’s full-year EPS of $1.64 to grow 5.8%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Copart has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 24.2% over the last five years.

Taking a step back, we can see that Copart’s margin expanded by 7.5 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Copart’s free cash flow clocked in at $427.2 million in Q3, equivalent to a 37% margin. This result was good as its margin was 15.6 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Copart’s five-year average ROIC was 32.4%, placing it among the best business services companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Copart’s ROIC decreased by 4.1 percentage points annually over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Copart is a profitable, well-capitalized company with $5.24 billion of cash and $99.94 million of debt on its balance sheet. This $5.14 billion net cash position is 12.8% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was good to see Copart beat analysts’ EPS expectations this quarter. On the other hand, its revenue missed. Overall, this was a weaker quarter. The stock traded down 2.2% to $40.09 immediately following the results.

Updated: December 4, 2025 at 9:33 PM EST

Before investing in or passing on Copart, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Copart is an amazing business ranking highly on our list. First of all, the company’s revenue growth was exceptional over the last five years. And while its declining adjusted operating margin shows the business has become less efficient, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits. On top of that, Copart’s impressive operating margins show it has a highly efficient business model.

Copart’s P/E ratio based on the next 12 months is 23.3x. Scanning the business services space today, Copart’s fundamentals really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $48.89 on the company (compared to the current share price of $38.79), implying they see 26% upside in buying Copart in the short term.