Copart, Inc. CPRT, which provides online auctions of salvage and clean-title vehicles, is set to gain from its leadership position in the automotive auction market, an expected rise in total loss rates and the acquisition of Purple Wave.
Let’s see what makes this Zacks Rank #2 (Buy) stock worth buying.
Copart enjoys a leadership position in the automotive auction market, commanding roughly 40% of the market share. The company’s competitiveness is supported by its multiple locations (both domestic and international) and the size of its new facilities. Copart's revenues look poised for an upward trajectory, thanks to its large scale, solid market leadership and continued expansion efforts.
Salvage auction volumes are expected to stay high due to more vehicle miles being traveled and increased collision rates. Additionally, the aging of vehicles and the rise of technologically advanced auto parts are benefiting industry players like Copart.
Since replacing complex components is costly, insurance companies often declare vehicles as total losses, pushing more cars to the salvage market. Copart charges sellers a fixed fee for each vehicle sold, regardless of its selling price. The anticipated rise in total loss rates is expected to drive Copart's revenue growth. So, while scrapped cars might not be as profitable individually, they can still be highly beneficial due to the consistent and predictable fee-based revenues they generate in large volumes.
The acquisition of Purple Wave, an online offsite heavy equipment auction company, is a positive development. Purple Wave's total sales have grown 8% year over year for the trailing 12 months ended January compared to the same period last year, outpacing industry growth in the equipment auction markets. Copart has built a community of buyers and sellers at Purple Wave and continues to invest in its capabilities. Within Purple Wave’s current markets, there are enough growth opportunities to attract new sellers and provide additional equipment to the existing ones.
The firm’s strong balance sheet with no leverage and high liquidity provides it with financial flexibility. At the end of the second quarter of fiscal 2025, the company had $5 billion of liquidity, comprising $3.8 billion in cash and investments and a revolving credit facility of more than $1.2 billion.
Some other top-ranked stocks in the auto space are Geely Automobile Holdings Limited GELYY, Dana Incorporated DAN and Strattec Security Corporation STRT, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GELYY’s fiscal 2025 sales and earnings indicates year-over-year growth of 66.62% and 149.31%, respectively. EPS estimates for fiscal 2025 and 2026 have improved 15 cents and 38 cents, respectively, in the past 60 days.
The Zacks Consensus Estimate for DAN’s 2025 earnings implies year-over-year growth of 70.21%. EPS estimates for 2025 and 2026 have improved 10 cents each in the past seven days.
The Zacks Consensus Estimate for STRT’s 2025 sales indicates year-over-year growth of 2.61%. EPS estimates for 2025 and 2026 have improved 91 cents and $1.06, respectively, in the past 30 days.
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Dana Incorporated (DAN) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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