KMX Stock: Pay a Little Extra for Performance

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CarMax, Inc (NYSE:KMX), a retailer that sells high-quality used vehicles, has been around since 1993 — and all that time, KMX has quietly gone about the business of revolutionizing its area of the auto industry.

Carmax 185KMX might not be the sexiest company around — in fact, it definitely isn’t — but if you’re looking for a stock that has growth potential over the next several months, KMX is a good investment.

Here’s why.

The Way People Buy Cars Is Changing

Years ago, a lot of legwork was involved in buying a car. A prospective buyer went from dealer to dealer looking for that perfect vehicle. And once they found it, they were expected to haggle with a salesperson to get the best deal.

Well, I’m happy to say those days are over.

Today, interested car buyers can go online to find the vehicle they want. And once they find it, they don’t have to argue about how much it’s going to cost.

This is where the KMX sales approach shines. The retailer’s one-stop shopping approach to car-buying incorporates a user-friendly website, a large selection of certified used vehicles, financing and a no-haggle sales policy.

KMX Continues to Grow

CarMax is experiencing a growth spurt that should last for some time. The company is in the process of hiring 2,500 workers across the United States to help staff its 143 retail locations. And KMX plans to open 10 to 15 more stores this year

KMX’s latest earnings grew to 60 cents — an increase of 28% year-over-year, and better than analysts’ estimates of 54 cents. Revenue also was up for the quarter — Carmax reported $3.41 billion in revenues, up 16% and better than the Street mark of $3.26 billion.

An Employee-Centered Company

Fortune voted CarMax one of the 100 best companies to work for in 2014, the 10th straight year the company has made the list. The company also made Training magazine’s Top Training 125 for the seventh consecutive year.

The takeaway: KMX is a company that cares about its employees’ well-being, as well as their aptitude in customer interaction. Happy employees theoretically should provide customers with a better buying experience, and generally speaking, they can even help the bottom line.

Bottom Line

A comparison among KMX and competitors like AutoNation Inc. (NYSE:AN) and Penske Automotive Group, Inc. (NYSE:PAG) doesn’t show a significant difference — it’s slightly more expensive, but also has slightly better prospects. If nothing else, investors should at least note that this isn’t a value story — it’s a growth story.

And this growth story is a full one, with the change in how Americans buy cars and a company culture that’s focused on employee retention all boding well for KMX moving ahead.

As of this writing, Will Emerson did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/02/carmax-inc-kmx-stock-trade/.

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