America's Car-Mart (CRMT)

Used-car retailer America’s Car-Mart (NASDAQ:CRMT) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 1.5% year on year to $341.3 million. Its GAAP loss of $0.69 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).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

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. On the bright side, it can grow faster because it has more white space to build new stores.

As you can see below, America's Car-Mart’s 12.7% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was solid despite not opening many new stores.

This quarter, America's Car-Mart missed Wall Street’s estimates and reported a rather uninspiring 1.5% year-on-year revenue decline, generating $341.3 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 7.3% over the next 12 months, a deceleration versus the last six years. Despite the slowdown, this projection is healthy and suggests the market sees success for its products.

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 provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

America's Car-Mart’s demand has been shrinking over the last two years as its same-store sales have averaged 4.2% 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 same-store sales fell by 4.1% year on year. This performance was more or less in line with its historical levels.

We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate product differentiation, negotiating leverage, and pricing power.

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 46.8% gross margin over the last two years. That means for every $100 in revenue, only $53.22 went towards paying for inventory, transportation, and distribution.

America's Car-Mart’s gross profit margin came in at 18.5% this quarter, in line with the same quarter last year. Zooming out, America's Car-Mart’s full-year margin has been trending up over the past 12 months, increasing by 1.8 percentage points. If this move continues, it could suggest the company has less pressure to discount products and is realizing better unit economics due to stable or shrinking input costs (such as labor and freight expenses to transport goods).

Operating margin is an important measure of profitability for retailers as it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.

America's Car-Mart was profitable over the last two years but held back by its large cost base. Its average operating margin of 4.1% was weak for a consumer retail business. This result is surprising given its high gross margin as a starting point.

On the plus side, America's Car-Mart’s operating margin rose by 4.7 percentage points over the last year, as its sales growth gave it immense operating leverage.

This quarter, America's Car-Mart generated an operating margin profit margin of 3.5%, down 1.5 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.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for America's Car-Mart, its EPS declined by 23% annually over the last six years while its revenue grew by 12.7%. This tells us the company became less profitable on a per-share basis as it expanded.

In Q2, America's Car-Mart reported EPS of negative $0.69, down from negative $0.15 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects America's Car-Mart’s full-year EPS of $1.55 to grow 163%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

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 3.4%. This means it lit $3.36 of cash on fire for every $100 in revenue.

America's Car-Mart burned through $6.38 million of cash in Q2, equivalent to a negative 1.9% margin. The company’s cash burn was similar to its $15.96 million of lost cash in the same quarter last year.

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 8.5%, 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 burned through $43.07 million of cash over the last year, and its $775.1 million of debt exceeds the $9.67 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the America's Car-Mart’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of America's Car-Mart until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 12.6% to $38.89 immediately following the results.

Updated: November 14, 2025 at 9:33 PM EST

Are you wondering whether to buy America's Car-Mart or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

America's Car-Mart doesn’t pass our quality test. Although its revenue growth was solid over the last six years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last six years makes it a less attractive asset to the public markets. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is 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 8.5x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $39.50 on the company (compared to the current share price of $18.25).

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.