Copart, Inc. (CPRT): A Case for Undervaluation Amid Long-Term Industry Tailwinds

The stock of Copart, Inc. (NASDAQ: CPRT) has drawn significant attention from investors and analysts in late 2025, as its valuation metrics suggest a compelling discount relative to both historical averages and industry peers. With a current price-to-earnings (P/E) ratio of 25.83 and a price-to-book (P/B) ratio of 4.76, Copart trades at a material discount to its 5-year average P/E of 32.94 and well below the peer average P/E of 36.1x. This undervaluation, coupled with robust industry tailwinds and a cautiously optimistic analyst consensus, positions CPRT as a potential candidate for a near-term 25% upside.

Valuation Metrics: A Discount to Fair Value and Peers

Copart's current valuation appears to reflect a combination of short-term volatility and long-term skepticism. As of November 2025, the stock trades at $38.67, a 20% discount to its estimated fair value of $49.05. This gap is particularly striking given the company's strong financial performance in 2025, including a 14% year-over-year revenue increase in Q2 and a 6.8% rise in global insurance average selling prices. The company's P/E ratio of 23.5x is significantly lower than the industry peer average, suggesting it is trading at a relative discount to its peers.

Analyst price targets further reinforce this narrative. The average 1-year price target of $49.67 implies a 29% upside from the current price according to analysts. While the consensus rating of "Hold" reflects a cautious outlook, the distribution of ratings-1 "Strong Buy," 2 "Buy," 4 "Hold," and 1 "Sell"-indicates a balanced view of Copart's potential to navigate near-term challenges while capitalizing on long-term growth drivers according to market data.

Industry Tailwinds: Structural Growth in the Used Car Auction Sector

The used car auction industry is poised for sustained growth, driven by structural trends that align with Copart's core business. A key driver is the rising frequency of totaled vehicles, which hit a record 22.2% in 2025. Factors such as increased repair costs, the complexity of modern vehicles (including advanced driver-assistance systems), and natural disasters have all contributed to this trend. Copart's dominant position in the U.S. market-where it captures nearly 40% of the used car auction market-positions it to benefit from this surge in inventory according to market research.

International demand is another critical tailwind. Vehicles purchased by international buyers in 2025 were valued 38% higher than domestic purchases, reflecting strong global appetite for U.S. used cars. This trend is further amplified by U.S. tariffs on imported vehicles, which have increased the cost of new cars and driven demand toward the used market. Additionally, Copart's strategic expansion into non-insurance segments, such as its Blue Car program (which grew 27% year-over-year), diversifies its revenue streams and reduces reliance on the cyclical insurance sector.

Technological advancements are also reshaping the industry. Online auctions, AI-driven pricing tools and digital titling solutions are enhancing efficiency and transparency, enabling Copart to streamline operations and improve inventory turnover. These innovations not only reduce transaction times but also lower administrative delays, a critical advantage in a market where speed and liquidity are paramount.

Near-Term Challenges and Strategic Resilience

Despite these positives, Copart faces near-term headwinds, including a decline in insurance unit volumes in Q3 2025 due to fewer claims and a shift to less comprehensive insurance coverage. However, the company has demonstrated resilience by offsetting these declines with higher auction returns and international demand. For instance, global insurance average selling prices rose 6.8% year-over-year, and international buyers accounted for a significant portion of Copart's revenue.

Management's focus on non-insurance segments, such as fleet and rental car auctions, further insulates the business from insurance market volatility. The Blue Car program's 27% growth in 2025 underscores Copart's ability to adapt to changing market dynamics according to recent reports. Additionally, the company's investment in digital platforms like Purple Wave and the Blue Car Advisory Board highlights its commitment to innovation and long-term competitiveness according to market analysis.

Conclusion: A Compelling Case for a 25% Upside

The combination of Copart's undervaluation, strong industry fundamentals, and strategic adaptability creates a compelling case for a near-term 29% upside to the average analyst price target of $49.67 according to price targets. While the "Hold" consensus rating reflects caution about short-term volatility, the company's dominant market position, exposure to structural growth drivers, and technological edge position it to outperform in the long run. For investors seeking a balance of value and growth, Copart represents an attractive opportunity in a sector poised for sustained expansion.