Copart, Inc. (NASDAQ:CPRT) specializes in online auto auctions for used vehicles as well as parts to resellers, dismantlers, rebuilders, etc.
It’s like the eBay Inc (NASDAQ: EBAY) of used vehicles of all sorts. And it’s up 34% year to date and 84% in the past 12 months.
Benefits of Change for CPRT Stock
The used car industry is far more complex than most people realize, and it has only gotten more complex since the advent of the internet. In the old days, you would trade in your used car and it would get an inspection from the dealer and would likely end up on one of his lots somewhere.
Then regional and local auctions started to become more common. Cars and other vehicles would get sent to major auctions where dealers could sell used cars that weren’t moving in their particular markets and get models that were in more demand.
Also, these were places where vehicles would show up from natural disasters like last year’s hurricanes. Insurance companies wrote off the vehicles and the owners either walked away from them, donated them or junked them. We’re talking thousands of vehicles.
Places like CPRT end up with these vehicles. It also receives repossessed vehicles and impound vehicles.
Now add to this the effort by the Barack Obama administration to get older, less fuel efficient and higher polluting cars off the street by offering incentives to trade them in. There was a huge response to this program. But the unintended consequence was it made used cars harder to come by since the older models couldn’t be resold in the U.S.
But that also started a new market overseas. Smart business people decided to sell all these vehicles to resellers in emerging markets, where new cars are very expensive and difficult to come by.
So, from its humble roots in California, CPRT is now a global used vehicle seller to all manner of customers. It has 200 locations in 11 countries and has 125,000 vehicles up for auction every day.
Again, in the U.S. the used car market lacked inventory for quite a while, which meant used car prices were high, and low interest rates meant car salesmen we’re finding it very easy to sell new cars with longer financing to prospective buyers. But now, interest rates are on the rise, which will squeeze of the new sales. Plus, used vehicle inventory is on the rise, so prices are coming down.
All this is reflected in the outsized growth CPRT has displayed in the past year. And as its reputation grows, so will its inventory and its reputation both here and abroad.
The final important aspect to remember is that these trends are long term. The don’t shift from quarter to quarter. Rates in the U.S. will continue to rise, and a cheaper dollar means these cars will see increasing demand abroad. Domestically, local and online resellers benefit from a growing inventory and better margins.
CPRT revenue was up 28% in the past quarter and income was up 40%.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.