Is Copart (CPRT) Stock a Buy Despite Strong Earnings? A Valuation and Growth Analysis

Copart (CPRT) has long been a bellwether in the salvage vehicle auction industry, but its recent financial performance and valuation metrics have sparked debate among investors. Despite a Q2 2025 earnings beat on earnings per share (EPS) and robust long-term growth initiatives, the stock’s valuation appears stretched relative to its fundamentals. This analysis evaluates whether CPRT remains a compelling buy, balancing its strategic strengths against valuation realism and market dynamics.

Earnings Performance: A Mixed Bag

Copart reported Q2 2025 revenue of $1.13 billion, a 5.2% year-over-year increase but below the $1.16 billion Wall Street consensus estimate [1][2]. The shortfall stemmed from softer insurance volumes and a strategic shift to process lower-value vehicles through its direct buy channel, which management described as a long-term efficiency play [2]. However, the company exceeded expectations on the bottom line, delivering a GAAP EPS of $0.41 versus the projected $0.36 [1].

For FY 2026, Copart guided to quarterly revenue of $1.23 billion to $1.31 billion and EPS of $0.42 to $0.47 [4]. These projections reflect confidence in its auction liquidity initiatives and international buyer expansion, yet the recent revenue miss has raised questions about near-term execution risks.

Valuation Realism: Overpriced or Fairly Valued?

Copart’s valuation metrics suggest a stock priced for perfection. Its trailing price-to-earnings (P/E) ratio stands at 30.47, while the forward P/E is 28.89 [1]. These figures exceed the US Commercial Services industry average of 28.4x but remain below the peer group average of 41x [1]. However, the PEG ratio—a critical gauge of valuation合理性—tells a different story. At 2.29, Copart’s PEG ratio indicates that the stock is overvalued relative to its expected earnings growth [4].

Enterprise value to EBITDA (EV/EBITDA) metrics further highlight this tension. Copart’s EV/EBITDA of 22.02 is in line with industry benchmarks but contrasts sharply with its intrinsic valuation of $33.81, which is 30% below the current market price of $48.40 [4]. Analysts remain divided: while some maintain a “Buy” rating with a $54.50 average price target (12.42% upside) [1], others have trimmed their optimism, with Stephens recently lowering its target to $46.00 [4].

Long-Term Growth: Strategic Moves in a Booming Market

The global online salvage auctions market is projected to grow at a 17.4% CAGR through 2030, driven by digital adoption and sustainability trends [1]. Copart is well-positioned to capitalize on this expansion. Its VB3 platform, enhanced with AI-driven pricing and 360-degree vehicle imaging, has solidified its dominance in a capital-light business model [2]. Additionally, the acquisition of Purple Wave—a heavy equipment auction firm—signals Copart’s intent to diversify beyond automotive vehicles [4].

Geographic expansion in Europe and Latin America, coupled with strategic land ownership (nearly 90% of its facilities are owned), provides operational flexibility during high-demand events like natural disasters [5]. These initiatives align with Copart’s goal of achieving a 7.5% revenue growth in Q3 2025 [6].

Competitive Positioning: A Durable Moat

Copart’s competitive advantages are formidable. It commands 40% of the US salvage auction market and operates 275+ locations across 11 countries, creating high barriers to entry [5]. Its proprietary buyer network—750,000 registered users—ensures liquidity, while relationships with major insurers secure over 80% of its vehicle inventory [5]. Despite these strengths, Copart lags peers in Return on Equity (4.76%), underscoring efficiency challenges [1].

Risks and Considerations

The stock’s recent 10.9% drop on May 23, 2025, following the Q2 revenue miss, highlights execution risks [6]. Rising facility operating expenses and mixed Q4 2025 results also warrant caution [3]. While Copart’s strong cash reserves and 17% five-year revenue CAGR are positives, investors must weigh these against valuation concerns and macroeconomic headwinds.

Conclusion: A Buy for the Long-Term, But With Caution

Copart’s strategic initiatives and dominant market position justify optimism for its long-term prospects. However, its current valuation appears stretched, particularly given the PEG ratio and intrinsic value discrepancies. For patient investors who can stomach near-term volatility and believe in the company’s ability to execute its growth plans, CPRT may still offer value. That said, the stock is best suited for those with a multi-year horizon and a tolerance for overvaluation risks.

Source:
[1] Copart (CPRT) Statistics & Valuation [https://stockanalysis.com/stocks/cprt/statistics/]
[2] CPRT Q2 Deep Dive: Auction Liquidity and Operational Shifts [https://finance.yahoo.com/news/cprt-q2-deep-dive-auction-053048097.html]
[3] Copart Q3 2025 Earnings Brief [https://seekingwinners.substack.com/p/copart-q3-2025-earnings-brief]
[4] Copart (CPRT) Financial Ratios [https://stockanalysis.com/stocks/cprt/financials/ratios/]
[5] Get up to speed on Copart, Inc. (CPRT) [https://www.tenzingmemo.com/companies/cprt_copart-inc]
[6] Copart Inc. (CPRT) Stock Forecast: Down 10.9% Today [https://www.morpher.com/insights/market/stock/CPRT]