Over the past six months, Copart’s shares (currently trading at $47.88) have posted a disappointing 17.8% loss, well below the S&P 500’s 1.1% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Following the drawdown, is now a good time to buy CPRT? Find out in our full research report, it’s free.
Why Is Copart a Good Business?
Starting as a single salvage yard in California in 1982, Copart (NASDAQ:CPRT) operates an online auction platform that connects sellers of damaged and salvage vehicles with buyers ranging from dismantlers and rebuilders to used car dealers and exporters.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Copart grew its sales at an incredible 15.6% compounded annual growth rate. Its growth surpassed the average business services company and shows its offerings resonate with customers. 
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Copart’s EPS grew at an astounding 19.6% compounded annual growth rate over the last five years, higher than its 15.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Copart has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 23% over the last five years.
Final Judgment
These are just a few reasons why we think Copart is one of the best business services companies out there. After the recent drawdown, the stock trades at 27.9× forward P/E (or $47.88 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Copart
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