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Carmax Inc (KMX)
NYSE:KMX
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CarMax
(NYSE:KMX)62Neutral
Positive Factors
Earnings
CarMax Auto Finance income increased 7.6% year over year and loan losses were significantly lower than expected.
Financial Performance
CarMax delivered very solid fiscal Q3 results with outperformance across virtually all key metrics.
Negative Factors
Competition
Competition from CVNA likely to impact CarMax with CVNA selling significant retail units compared to KMX.
CarMax (KMX) vs. S&P 500 (SPY)
Market Cap
$11.92B
Dividend YieldN/A
Average Volume (3M)1.57M
Price to Earnings (P/E)26.1
Beta (1Y)1.44
Revenue Growth-2.46%
EPS Growth-6.19%
CountryUS
Employees29,836
SectorConsumer Cyclical
Sector Strength53
IndustryVehicles
Share Statistics
EPS (TTM)2.94
Shares Outstanding153,799,970
10 Day Avg. Volume1,781,833
30 Day Avg. Volume1,573,272
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.46
Price to Cash Flow (P/CF)-127.60
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$88.00Price Target Upside14.70% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
CarMax Business Overview & Revenue Model
Company DescriptionCarMax, Inc. (KMX) is a leading retailer of used vehicles in the United States, headquartered in Richmond, Virginia. The company operates in the automotive retail sector and offers a wide range of used cars and related automotive services. CarMax provides a hassle-free car buying experience with transparent pricing and a large inventory of vehicles available both online and at its numerous store locations across the country. In addition to vehicle sales, CarMax offers services such as financing, extended warranties, and vehicle appraisals.
How the Company Makes MoneyCarMax generates revenue primarily through the sale of used vehicles. The company purchases vehicles from auctions, customers, and other sources, which are then reconditioned and sold at a markup. CarMax also earns money from selling extended service plans and financing products, either through its own CarMax Auto Finance division or third-party financial institutions. The company's revenue model is further supported by its online sales platform, which allows customers to browse and purchase vehicles online, sometimes complemented by in-store visits. The combination of retail vehicle sales, financing, and service plans constitutes the core revenue streams for CarMax.
CarMax Financial Statement Overview
Summary
CarMax faces challenges with declining revenues and high leverage, impacting financial stability. Profitability metrics suggest moderate performance, while cash flow generation indicates some positives. To strengthen its financial position, CarMax needs to focus on revenue growth and managing debt levels effectively.Income Statement
CarMax's TTM (Trailing-Twelve-Months) revenue shows a decline from the previous annual period. The gross profit margin is approximately 10.6%, and the net profit margin stands at 1.8%, indicating moderate profitability. EBIT and EBITDA margins are 1.1% and 2.3%, respectively, reflecting some operational efficiency but a need for improvement. The revenue growth has been negative, suggesting challenges in maintaining sales momentum.70
Positive
Balance Sheet
The debt-to-equity ratio is relatively high at approximately 2.84, indicating significant leverage which could pose financial risks. The return on equity (ROE) is around 7.4%, showing moderate shareholder returns. The equity ratio is 22.8%, suggesting a reasonable level of equity financing, but the high leverage may impact financial stability.60
Neutral
Cash Flow
CarMax's free cash flow has shown improvement in the TTM period, with a positive free cash flow of $337 million. The operating cash flow to net income ratio is 1.71, suggesting healthy cash generation relative to profits. However, the free cash flow to net income ratio is lower at 0.73, indicating room for improvement in cash conversion.65
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 25.98B | 26.54B | 29.68B | 31.90B | 18.95B | 20.32B | Gross Profit |
| 2.68B | 2.71B | 2.80B | 3.29B | 2.38B | 2.72B | EBIT |
| 786.46M | 942.20M | 1.07B | 1.82B | 1.05B | 1.24B | EBITDA |
| 1.22B | 1.04B | 1.02B | 1.83B | 1.29B | 1.45B | Net Income Common Stockholders |
| 460.96M | 479.20M | 484.76M | 1.15B | 746.92M | 888.43M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 271.91M | 574.14M | 314.76M | 102.72M | 132.32M | 58.21M | Total Assets |
| 27.30B | 27.20B | 26.18B | 26.34B | 21.54B | 21.08B | Total Debt |
| 17.63B | 19.53B | 18.93B | 19.27B | 15.53B | 15.85B | Net Debt |
| 17.35B | 18.74B | 18.62B | 19.17B | 15.39B | 15.79B | Total Liabilities |
| 21.09B | 21.12B | 20.57B | 21.10B | 17.18B | 17.31B | Stockholders Equity |
| 6.21B | 6.07B | 5.61B | 5.24B | 4.36B | 3.77B |
| Cash Flow | Free Cash Flow | ||||
| 337.51M | -6.69M | 860.62M | -2.86B | 503.22M | -568.50M | Operating Cash Flow |
| 787.70M | 458.62M | 1.28B | -2.55B | 667.76M | -236.61M | Investing Cash Flow |
| -457.70M | -467.00M | -425.77M | -523.75M | -128.18M | -389.36M | Financing Cash Flow |
| -614.24M | 307.79M | -710.18M | 3.10B | -424.02M | 686.98M |
CarMax Technical Analysis
Negative
76.72
Price Trends
82.86
Negative
80.81
Negative
78.55
Negative
Market Momentum
-1.48
Positive
29.75
Positive
14.87
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KMX, the sentiment is Negative. The current price of 76.72 is below the 20-day moving average (MA) of 83.72, below the 50-day MA of 82.86, and below the 200-day MA of 78.55, indicating a bearish trend. The MACD of -1.48 indicates Positive momentum. The RSI at 29.75 is Positive, neither overbought nor oversold. The STOCH value of 14.87 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for KMX.
CarMax Risk Analysis
CarMax disclosed 26 risk factors in its most recent earnings report. CarMax reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
CarMax Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $11.13B | 12.14 | 18.50% | 2.66% | 3.14% | -11.22% | |
74 Outperform | $5.87B | 12.04 | 17.23% | 0.42% | 11.53% | -13.75% | |
73 Outperform | $8.21B | 10.55 | 12.47% | 0.67% | 16.75% | -18.09% | |
68 Neutral | $2.25B | 10.80 | 22.11% | 1.88% | -1.03% | 24.64% | |
63 Neutral | $6.71B | 10.10 | 29.65% | ― | -0.68% | -25.24% | |
62 Neutral | $11.92B | 26.09 | 7.52% | ― | -2.46% | -6.19% | |
60 Neutral | $13.01B | 10.45 | 0.79% | 3.53% | 1.60% | -22.47% |
* Consumer Cyclical Sector Average
Performance Comparison
KMX
CarMax
76.72
-4.41
-5.44%
AN
AutoNation
171.07
22.69
15.29%
GPI
Group 1 Automotive
441.25
178.25
67.78%
LAD
Lithia Motors
304.96
23.73
8.44%
PAG
Penske Automotive Group
169.20
21.03
14.19%
SAH
Sonic Automotive
66.60
15.54
30.43%
CarMax Earnings Call Summary
Earnings Call Date: Dec 19, 2024 | % Change Since: -5.77% | Next Earnings Date: Apr 10, 2025
Earnings Call Sentiment Positive
CarMax demonstrated strong financial performance and growth across key segments, with significant EPS growth and improvements in unit volumes and margins. However, the decline in average selling prices and challenges in lower-income consumer segments present some concerns.Highlights
Positive Trends and Robust EPS Growth
Retail, wholesale, and CAF all posted year-over-year gains. Third quarter EPS grew by 56% versus the previous year, reflecting solid execution and cost efficiencies.
Growth in Unit Volumes and Margins
Retail unit sales increased by 5.4%, and wholesale unit sales rose by 6.3% year-over-year. Retail gross profit per used unit increased to $2,306, and wholesale gross profit per unit rose to $1,015.
SG&A Leverage and Cost Efficiencies
SG&A expenses were up only 3%, while total gross profit increased by 11%. SG&A leveraged by 640 basis points due to growth in gross profit and expense efficiency actions.
Increase in Online Transactions
Approximately 32% of total revenue came from online transactions, a 1% increase from last year.
CarMax Auto Finance (CAF) Income Growth
CAF income was $160 million, up 8% from the same quarter last year, with a net interest margin increase of 35 basis points year-over-year.
Lowlights
Decline in Average Selling Prices
Average selling price for retail vehicles declined by approximately $1,100 per unit or 4% year-over-year. Wholesale vehicle average selling prices also declined by about $500 per unit or 6%.
Provision for Loan Losses and Reserve Levels
The provision for loan losses was $73 million, resulting in a reserve balance of $479 million, reflecting a cautious approach to future lifetime losses.
Challenges in Consumer Segments
Consumers making less than $3,000 monthly are still half of what they used to be for CarMax, indicating ongoing struggles for lower-income segments.
Company Guidance
During the third quarter of fiscal year 2025, CarMax reported robust financial results, demonstrating the strength of its diversified business model. The company achieved total sales of $6.2 billion, marking a 1% increase compared to the previous year, primarily driven by higher unit volumes. This growth was complemented by a 5.4% rise in total retail unit sales and a 6.3% increase in wholesale unit sales. CarMax also reported significant gains in gross profits, with retail gross profit per used unit reaching $2,306, slightly up from $2,277 the prior year, and wholesale gross profit per unit rising to $1,015 from $961. The company's CarMax Auto Finance (CAF) segment generated $160 million in income, up 8% year-over-year, supported by a net interest margin of 6.2%. Additionally, the SG&A expenses were effectively managed, leading to a 3% increase, which was significantly leveraged by the gross profit growth. Overall, CarMax's strategic focus on omnichannel capabilities and cost efficiencies facilitated a double-digit EPS growth of 56%, amounting to $0.81 per diluted share.CarMax Corporate Events
Executive/Board ChangesShareholder Meetings
CarMax Board Changes: Director Departure and Bylaws Amendment
Neutral
Jan 31, 2025
On January 28, 2025, CarMax board member Ronald E. Blaylock announced he would not seek reelection at the company’s 2025 annual meeting, a decision unrelated to any disagreement with the company. Additionally, the CarMax Board amended the company’s bylaws to allow shareholders owning at least 20% of common stock to call special meetings, potentially increasing shareholder influence in company decisions.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.