When people think of inflation, they think about the prices of raw materials going up. Commodities like gold, steel, copper, and oil have seen an uptrend over the past few months. However, inflation has manifested in other lesser-known ways. Home prices are going strong while prices of used cars have also seen strength. Companies like Carmax are reaping the rewards of this trend. Carmax is the largest used car retailer in the US. Investors looking for the best auto stocks to invest in may want to consider Carmax Inc. The company was delivering vehicles and doing business even during the worst months of the pandemic. As the economy took a hit, people tightened their purses and opted to purchase a used vehicle instead of a more expensive new vehicle.
More About Carmax Inc
Carmax Inc earns more than 80% of its revenue from used vehicle sales. The remaining income comes from its wholesale business as well as its service and repair plans. Interestingly, Carmax was initially formed as a unit of consumer electronics retailer Circuit City back in 1993. However, about a decade later, in 2002, it was spun off into an independent company. Today, Carmax has some 220 retail stores across several regions of the US. The runway for growth for Carmax is also quite long. It currently is estimated to have about 3.5% of the market share for vehicles between 0 and 10 years old in the US. Carmax has a goal of reaching a 5% market share level by the year 2025. In the year 2021, Carmax retailed more than 750,000 vehicles and wholesaled over 425,000 used cars. Carmax is one of the auto stocks to invest in if you are thinking about used cars and auto retailing.
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Carmax trades on the New York Stock Exchange under the ticker symbol KMX. The stock closed at $115 on 9th June 2021. At the time, it was trading at a P/E ratio of slightly over 25. The stock was down a significant 10% on a 1-month basis. The 1-year return was 25%.