CarMax (KMX) AI Stock Analysis

• Market Cap: $6.57B
• Dividend Yield: N/A
• Average Volume (3M): 3.85M
• Price to Earnings (P/E): 15.5
• Beta (1Y): 0.91
• Revenue Growth: 0.12%
• EPS Growth: 2.78%
• Country: US
• Employees: 30,048
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Auto - Dealerships
• EPS (TTM): 0.43
• Shares Outstanding: 141,796,650
• 10 Day Avg. Volume: 3,399,177
• 30 Day Avg. Volume: 3,847,788
• PEG Ratio: 4.11
• Price to Book (P/B): 2.06
• Price to Sales (P/S): 0.46
• P/FCF Ratio: 82.35
• Enterprise Value/Market Cap: 3.52
• Enterprise Value/Revenue: 0.83
• Enterprise Value/Gross Profit: 7.35
• Enterprise Value/Ebitda: 21.73
• 1Y Price Target: $34.00
• Price Target Upside: -27.60% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 13
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 61 Neutral
• Price Target: $50.00 ▲(6.47% Upside)

CarMax's overall stock score reflects a mixed financial performance with strong cash flow but declining revenue and high leverage. Technical analysis shows cautious signals, and while the valuation is reasonable, the earnings call highlights significant challenges. The recent CEO change adds uncertainty, but strategic initiatives could provide long-term benefits.

Positive Factors

Market leadership & scale

CarMax's position as the largest U.S. used-car retailer provides durable advantages: broad buying scale, national inventory and brand recognition support sourcing, customer choice and pricing credibility. Scale lowers per-unit costs and aids resilience across regional demand swings.

Strong free cash flow generation

Large FCF improvement and healthy cash conversion (operating cash flow to net income ~1.18; FCF/net income ~0.78) give CarMax durable financial flexibility to invest in digital, pay down debt, fund CAF growth, and weather cyclical retail headwinds without immediate capital constraints.

Growing Finance & ancillary income (CAF)

Expansion of CarMax Auto Finance and ancillary products builds a recurring, higher-margin revenue stream less correlated with spot used-car prices. Diversified finance income smooths earnings through cycles, enhances customer economics and supports lifetime value improvements structurally.

Negative Factors

High leverage on balance sheet

A debt/equity ratio ~2.75 and equity ratio ~23.7% indicate significant leverage that raises interest and refinancing risk. High leverage constrains strategic flexibility for acquisitions or aggressive inventory investment and magnifies downside in prolonged demand or margin downturns.

Declining sales and unit volumes

Sustained declines in total sales and retail unit comps (mid-single-digit to high-single-digit drops) signal structural demand or competitive pressures. Lower volumes reduce inventory turns, weaken purchasing economics, and require persistent marketing or price concessions to restore scale and margins.

Weak profitability and margin pressure

Sharp EPS decline and a low net margin (~1.77% TTM) reflect margin compression from higher acquisition costs, restructuring and competitive pricing. Persistently thin margins reduce cushion against shocks, limit reinvestment capacity, and make leverage more hazardous over the medium term.

CarMax Business Overview & Revenue Model

Company Description

CarMax, Inc., together with its subsidiaries, operates as a retailer of used vehicles in the United States. The company operates through two segments, CarMax Sales Operations and CarMax Auto Finance. It offers customers a range of makes and models of used vehicles, including domestic, imported, and luxury vehicles, as well as hybrid and electric vehicles; and extended protection plans to customers at the time of sale, as well as sells vehicles that are approximately 10 years old and has more than 100,000 miles through wholesale auctions. The company also provides reconditioning and vehicle repair services; and financing alternatives for retail customers across a range of credit spectrum through its CarMax Auto Finance and arrangements with various financial institutions. As of February 28, 2022, it operated approximately 230 used car stores. CarMax, Inc. was founded in 1993 and is based in Richmond, Virginia.

How the Company Makes Money

CarMax generates revenue primarily through the sale of used vehicles, which constitutes its main revenue stream. The company also earns money through the sale of vehicle financing and extended service plans. Financing options are provided through CarMax Auto Finance, which allows customers to access loans and leases. Additionally, CarMax benefits from trade-ins, where customers sell their old vehicles to the company, providing inventory for resale. The company's unique no-haggle pricing model helps maintain customer trust and satisfaction, contributing to repeat business. Furthermore, partnerships with various financial institutions enhance its financing offerings, while its investment in technology and online sales platforms has broadened its reach and improved operational efficiency.

CarMax Financial Statement Overview

Summary

CarMax's financial performance is mixed, with strong cash flow management and stable gross margins. However, challenges include declining revenue and high leverage, which could pose risks. The company needs to focus on revenue growth and leverage management to enhance financial stability.

Income Statement

CarMax's income statement shows a mixed performance. The TTM gross profit margin is stable at 11.06%, indicating consistent profitability from sales. However, the net profit margin has slightly decreased to 1.77%, reflecting challenges in maintaining bottom-line growth. Revenue has declined by 1.63% TTM, suggesting potential market pressures or operational challenges. The EBIT and EBITDA margins are modest, with TTM figures at 4.40% and 5.36%, respectively, indicating moderate operational efficiency.

Balance Sheet

CarMax's balance sheet reveals a high debt-to-equity ratio of 2.75 TTM, indicating significant leverage which could pose financial risks if not managed carefully. The return on equity is relatively low at 7.39% TTM, suggesting limited efficiency in generating returns from shareholders' equity. The equity ratio stands at 23.73%, reflecting a moderate level of equity financing relative to total assets.

Cash Flow

The cash flow statement shows strong free cash flow growth of 184.50% TTM, indicating improved cash generation capabilities. The operating cash flow to net income ratio is healthy at 1.18, suggesting effective conversion of income into cash. The free cash flow to net income ratio is robust at 0.78, highlighting efficient cash management and potential for reinvestment or debt reduction.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	28.21B	28.21B	31.13B	33.20B	20.09B
Gross Profit	3.22B	3.04B	3.24B	3.88B	2.94B
EBITDA	1.09B	1.06B	1.04B	1.87B	1.29B
Net Income	500.56M	479.20M	484.76M	1.15B	746.92M
Balance Sheet
Total Assets	27.40B	27.20B	26.18B	26.34B	21.54B
Cash, Cash Equivalents and Short-Term Investments	246.96M	574.14M	314.76M	102.72M	132.32M
Total Debt	19.43B	19.31B	18.93B	19.27B	15.66B
Total Liabilities	21.16B	21.12B	20.57B	21.10B	17.18B
Stockholders Equity	6.24B	6.07B	5.61B	5.24B	4.36B
Cash Flow
Free Cash Flow	156.50M	-6.69M	860.62M	-2.86B	503.22M
Operating Cash Flow	624.44M	458.62M	1.28B	-2.55B	667.76M
Investing Cash Flow	-461.00M	-467.00M	-425.77M	-523.75M	-128.18M
Financing Cash Flow	-453.54M	307.79M	-710.18M	3.10B	-424.02M

CarMax Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 46.96
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KMX, the sentiment is Positive. The current price of 46.96 is above the 20-day moving average (MA) of 44.78, above the 50-day MA of 40.79, and below the 200-day MA of 53.80, indicating a neutral trend. The MACD of 1.81 indicates Positive momentum. The RSI at 60.89 is Neutral, neither overbought nor oversold. The STOCH value of 34.46 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for KMX.

CarMax Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LAD	76 Outperform	$7.93B	9.46	13.44%	0.64%	8.56%	17.84%
PAG	71 Outperform	$10.56B	11.30	17.30%	3.14%	2.25%	8.92%
AN	70 Neutral	$7.71B	12.70	27.16%	―	6.06%	-1.71%
GPI	69 Neutral	$5.01B	13.97	12.27%	0.49%	19.45%	-24.27%
ABG	67 Neutral	$4.69B	8.56	15.49%	―	8.07%	60.95%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
KMX	61 Neutral	$6.57B	15.53	7.46%	―	0.12%	2.78%

CarMax Corporate Events

CarMax Announces CEO Change Amidst Strategic Shift

On November 4, 2025, CarMax announced the termination of CEO William D. Nash, effective December 1, 2025, and the appointment of David W. McCreight as Interim President and CEO. The leadership change is part of CarMax’s strategy to strengthen its business amid declining sales and profitability. The company also provided a preliminary financial outlook for the third quarter of fiscal year 2026, expecting a decrease in comparable store used unit sales and net earnings per diluted share impacted by leadership changes and increased marketing expenses.

The most recent analyst rating on (KMX) stock is a Buy with a $59.00 price target. To see the full list of analyst forecasts on CarMax stock, see the KMX Stock Forecast page.