Copart Inc – Best Business Stocks
Founded in 1982, Copart is a leading vehicle auction company in the US. It has about 25 years of experience in building a technology platform for managing inventory systems and conducting online auctions of vehicles. Population growth and fuel prices are key demand drivers for the company. Higher employment and urbanization are also important growth factors. With the pandemic now gradually fading and businesses re-opening, investors looking to buy business stocks could play the re-opening theme and look at greater demand for used and new vehicles. Alternatively, they could also consider the fact that higher congestion on the roads could have a direct impact on more serious accidents and greater demand for selling salvage vehicles to scrap dealers, something that Copart deals in. Therefore, Copart presents an interesting value proposition for investors. Copart sells vehicles on behalf of finance companies, banks, insurance companies, and fleet operators.
How Do Copart’s Financials Look?
Copart has grown its revenues from around $1.2 billion in FY2016 to over $2.1 billion in FY2020. Its operating income has also doubled from over $400 million in FY2016 to over $800 million in FY2020. Earnings per share on a diluted basis have grown from slightly over $1 per share in FY2016 to almost $3 per share in FY2020. So, there has been reasonably strong growth across the various financial metrics. Gross margins have improved from 43% to over 45% during the FY2016 to FY2020 period. So, growth has not come at the expense of margins. These are characteristics of some of the best business stocks that investors can consider. Interestingly, Copart has not paid a dividend throughout the past decade. It is a growth company that seems to be re-investing its profits back into the company.
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Copart isn’t just generating profits. Ultimately, cash is king. Free cash flow for Copart was roughly $170-odd million in 2011. That number had grown to over $325 million by the year 2020. The trailing-twelve-month estimate is over $500 million. So, Copart clearly seems to be generating significant amounts of cash and can be categorized as a high-quality business.
