Copart (CPRT)

Online vehicle auction company Copart (NASDAQ:CPRT) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 5.2% year on year to $1.13 billion. Its GAAP profit of $0.41 per share was 13.3% 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.

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $4.65 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 16.1% 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.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Copart’s annualized revenue growth of 9.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

We can better understand the company’s revenue dynamics by analyzing its most important segment, Service . Over the last two years, Copart’s Service revenue (processing and selling cars) averaged 11.5% year-on-year growth. This segment has outperformed its total sales during the same period, lifting the company’s performance.

This quarter, Copart’s revenue grew by 5.2% year on year to $1.13 billion, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, similar to its two-year rate. This projection is admirable and indicates the market is forecasting success for its products and services.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

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 38.4%.

Analyzing the trend in its profitability, Copart’s operating margin decreased by 5.7 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 Q2, Copart generated an operating margin profit margin of 36.7%, up 3 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 astounding 16.9% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Copart, its two-year annual EPS growth of 12.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q2, Copart reported EPS of $0.41, up from $0.33 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Copart’s full-year EPS of $1.60 to grow 6%.

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 23.3% over the last five years.

Taking a step back, we can see that Copart’s margin expanded by 6.9 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 $350.8 million in Q2, equivalent to a 31.2% margin. This result was good as its margin was 3 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? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Copart’s five-year average ROIC was 32.3%, 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.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Copart is a profitable, well-capitalized company with $4.79 billion of cash and $103.7 million of debt on its balance sheet. This $4.69 billion net cash position is 10.1% 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’ EBITDA and EPS expectations this quarter despite a revenue miss. Overall, this print was decent. The stock traded up 2% to $51 immediately following the results.

Updated: November 16, 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 a rock-solid business worth owning. 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 25.2x. Looking across the spectrum of business services companies today, Copart’s fundamentals shine bright. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $53.33 on the company (compared to the current share price of $41.17), implying they see 29.5% upside in buying Copart in the short term.