America's Car-Mart (CRMT)

Used-car retailer America’s Car-Mart (NASDAQ:CRMT) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 1.2% year on year to $350.2 million. Its GAAP loss of $2.71 per share was significantly below analysts’ consensus estimates.

Company Overview

With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ:CRMT) sells used cars to budget-conscious consumers.

Buying a vehicle is a big decision and usually the second-largest purchase behind a home for many people, so retailers that sell new and used cars try to offer selection, convenience, and customer service to shoppers. While there is online competition, especially for research and discovery, the vehicle sales market is still very fragmented and localized given the magnitude of the purchase and the logistical costs associated with moving cars over long distances. At the end of the day, a large swath of the population relies on cars to get from point A to point B, and vehicle sellers are acutely aware of this need.

Competitors in the auto retail space include AutoNation (NYSE:AN), CarMax (NYSE:KMX), and Group 1 Automotive (NYSE:GPI).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $1.38 billion in revenue over the past 12 months, America's Car-Mart is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.

As you can see below, America's Car-Mart’s 1.6% annualized revenue growth over the last three years (we compare to 2019 to normalize for COVID-19 impacts) was sluggish as it didn’t open many new stores.

This quarter, America's Car-Mart reported modest year-on-year revenue growth of 1.2% but beat Wall Street’s estimates by 5.8%.

Looking ahead, sell-side analysts expect revenue to decline by 1.9% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and indicates its products will see some demand headwinds.

Number of Stores

America's Car-Mart listed 154 locations in the latest quarter and has kept its store count flat over the last two years while other consumer retail businesses have opted for growth.

When a retailer keeps its store footprint steady, it usually means demand is stable and it’s focusing on operational efficiency to increase profitability.

Same-Store Sales

The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing stores and is driven by customer visits (often called traffic) and the average spending per customer (ticket).

America's Car-Mart’s demand has been shrinking over the last two years as its same-store sales have averaged 4.6% annual declines. This performance isn’t ideal, and we’d be concerned if America's Car-Mart starts opening new stores to artificially boost revenue growth.

In the latest quarter, America's Car-Mart’s year on year same-store sales were flat. This performance was a well-appreciated turnaround from its historical levels, showing the business is improving.

Gross profit margins are an important measure of a retailer’s pricing power, product differentiation, and negotiating leverage.

America's Car-Mart has great unit economics for a retailer, giving it ample room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an excellent 47.9% gross margin over the last two years. That means for every $100 in revenue, only $52.12 went towards paying for inventory, transportation, and distribution.

America's Car-Mart’s gross profit margin came in at 14.9% this quarter, down 6.3 percentage points year on year. America's Car-Mart’s full-year margin has also been trending down over the past 12 months, decreasing by 3.9 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to discount products and higher input costs (such as labor and freight expenses to transport goods).

America's Car-Mart’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 4.5% over the last two years. This profitability was lousy for a consumer retail business and caused by its suboptimal cost structure.

Looking at the trend in its profitability, America's Car-Mart’s operating margin might fluctuated slightly but has generally stayed the same over the last year. 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.

This quarter, America's Car-Mart generated an operating margin profit margin of negative 1.5%, down 8.7 percentage points year on year. Since America's Car-Mart’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, and administrative overhead increased.

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.

While America's Car-Mart posted positive free cash flow this quarter, the broader story hasn’t been so clean. America's Car-Mart’s demanding reinvestments have consumed many resources over the last two years, contributing to an average free cash flow margin of negative 1.9%. This means it lit $1.92 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that America's Car-Mart’s margin expanded by 2.2 percentage points over the last year. Despite its improvement and recent free cash flow generation, we’d like to see more quarters of positive cash flow before recommending the stock.

America's Car-Mart’s free cash flow clocked in at $8.27 million in Q3, equivalent to a 2.4% margin. Its cash flow turned positive after being negative in the same quarter last year, marking a potential inflection point.

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).

America's Car-Mart historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.8%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

America's Car-Mart’s $896.9 million of debt exceeds the $251 million of cash on its balance sheet. Furthermore, its 11× net-debt-to-EBITDA ratio (based on its EBITDA of $60.16 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. America's Car-Mart could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope America's Car-Mart can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We were impressed by how significantly America's Car-Mart blew past analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 8.9% to $21.25 immediately following the results.

Updated: December 4, 2025 at 7:40 AM EST

Before deciding whether to buy America's Car-Mart or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

America's Car-Mart falls short of our quality standards. First off, its revenue growth was uninspiring over the last three years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last three years makes it a less attractive asset to the public markets. On top of that, its shrinking same-store sales tell us it will need to change its strategy to succeed.

America's Car-Mart’s P/E ratio based on the next 12 months is 17.8x. This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $39.50 on the company (compared to the current share price of $21.25).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.