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Carmax Inc (KMX)
NYSE:KMX
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CarMax
(NYSE:KMX)
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Rating:71Outperform
Price Target:
$67.00
▲(13.31% Upside)
CarMax's strong earnings performance and strategic advancements in digital sales and market share expansion are significant positives. However, challenges in revenue growth, declining margins, and reliance on debt weigh on the overall score. The technical indicators suggest short-term stability but longer-term caution.
Positive Factors
Omni-Channel Sales Growth
CarMax's strong digital strategy enhances customer reach and convenience, supporting long-term growth by integrating online and offline sales channels.
Record EPS Growth
Sustained EPS growth indicates robust profitability and effective cost management, strengthening CarMax's financial position and shareholder value.
AI Implementation
AI deployment enhances operational efficiency and customer service, providing a competitive edge and supporting long-term business scalability.
Negative Factors
Decline in CAF Income
Decreased CAF income reflects challenges in the financing segment, potentially affecting profitability and cash flow if trends persist.
Loan Loss Provision Increase
Higher loan loss provisions indicate rising credit risk, which could impact financial stability and require more conservative lending practices.
Reliance on Debt
High leverage limits financial flexibility and increases risk, especially in volatile markets, potentially constraining future growth investments.
CarMax (KMX) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$9.07B
Dividend YieldN/A
Average Volume (3M)2.63M
Price to Earnings (P/E)16.7
Beta (1Y)0.91
Revenue Growth3.17%
EPS Growth42.14%
CountryUS
Employees30,048
SectorConsumer Cyclical
Sector Strength84
IndustryAuto - Dealerships
Share Statistics
EPS (TTM)1.38
Shares Outstanding150,072,160
10 Day Avg. Volume2,755,316
30 Day Avg. Volume2,628,483
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)0.00
Price to Sales (P/S)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap3.14
Enterprise Value/Revenue1.06
Enterprise Value/Gross Profit9.49
Enterprise Value/Ebitda16.37
Forecast
1Y Price Target
$76.91Price Target Upside30.07% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering12
CarMax Business Overview & Revenue Model
Company DescriptionCarMax, 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 MoneyCarMax generates revenue primarily through the sale of used vehicles, which constitutes its main revenue stream. The company purchases cars from various sources, including auctions and trade-ins, and then sells them to customers at a markup. In addition to vehicle sales, CarMax earns significant revenue from its financing services, where it offers loans to customers through its own finance arm. This includes both retail and wholesale financing. Additionally, CarMax offers extended service plans and vehicle warranties, which further contribute to its earnings. The company's focus on a transparent, customer-friendly buying experience has built strong brand loyalty, while its national footprint allows it to leverage economies of scale in vehicle procurement and sales. Partnerships with various financial institutions also enhance its financing capabilities, providing customers with competitive loan options.
CarMax Key Performance Indicators (KPIs)
Any
Average Selling Prices
Tracks the average price at which vehicles are sold, reflecting pricing strategy, market demand, and potential impact on revenue and margins.
Tracks the average price at which vehicles are sold, reflecting pricing strategy, market demand, and potential impact on revenue and margins.
Data provided by:
Main Street Data
Main Street DataCarMax Earnings Call Summary
Earnings Call Date:May 31, 2025
(Q1-2026)
| % Change Since: |
Next Earnings Date:Sep 25, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong performance with significant EPS growth, increased vehicle purchases, and successful implementation of digital strategies. However, challenges were evident in the decline of CAF income and increased loan loss provisions. Despite some financial headwinds, the overall tone remained optimistic about future growth and market positioning.Q1-2026 Updates
Positive Updates
Record EPS Growth
Achieved 42% EPS growth, marking the fourth consecutive quarter of positive retail unit comps and double-digit earnings per share growth.
Increased Vehicle Purchases
Purchased approximately 336,000 vehicles during the quarter, up 7% from last year, with significant purchases from both consumers and dealers.
Omni-Channel Sales Growth
80% of retail sales supported by digital capabilities, with 66% being omni and 14% online.
Share Repurchases
Doubled the pace of share repurchases, buying back approximately 3 million shares for a total spend of $200 million.
Increase in Service Margin
Service margin improved by $30 million over last year's first quarter, driven by cost coverage and efficiencies.
AI Implementation
Strategic deployment of AI technology improved customer service productivity by 24%.
Negative Updates
Decline in CAF Income
CAF income for the quarter was $142 million, down $5 million from FY '25, due to an influx of self-funded higher credit purchasers.
Loan Loss Provision Increase
CAF's loan loss provision increased to $102 million, influenced by higher sales and lower credit quality periods, and the uncertain economic outlook.
Decreased CarMax Auto Finance Penetration
CAF penetration decreased by 150 basis points from last year due to higher credit purchasers and increased Tier 3 penetration.
Company Guidance
In the first quarter of fiscal year 2026, CarMax, Inc. reported significant growth and strategic advancements. The company achieved total sales of $7.5 billion, marking a 6% increase from the previous year, driven by a 9% rise in total unit sales. Retail unit comps increased by 8.1%, with an average selling price of $26,100, despite a year-over-year reduction of $400 per unit. CarMax also recorded a 42% growth in earnings per share, marking the fourth consecutive quarter of positive retail unit comps and double-digit EPS growth. In terms of gross profit, the company reported a total of $894 million, up 13% from last year, with a retail gross profit per used unit reaching a record high of $2,407. The company also made significant strides in its CarMax Auto Finance division, originating over $2.3 billion with a net interest margin of 6.5%. Additionally, the company set a record by purchasing approximately 336,000 vehicles, a 7% increase from the previous year, and doubled the pace of its share repurchases. These results reflect CarMax's strong omni-channel experience, strategic execution, and focus on expanding market share while leveraging operational efficiencies.CarMax Financial Statement Overview
Summary
CarMax is maintaining profitability and cash flow generation despite revenue growth challenges and declining margins. The balance sheet shows a reliance on debt, but this is balanced by effective cash management and shareholder returns.Income Statement
CarMax shows reasonable profitability with a gross profit margin of approximately 11.2% and a net profit margin of 2.1% in TTM. However, the company is experiencing a decrease in revenue growth, with a drop of about 15.7% over the past two years. EBIT and EBITDA margins have also declined, indicating pressures on operational efficiency.70
Positive
Balance Sheet
The balance sheet reflects a moderately leveraged position with a debt-to-equity ratio of about 2.85. The return on equity (ROE) is fairly stable at 8.9% for TTM, suggesting that the company is generating returns for shareholders. However, equity ratio stands at 22.9%, indicating a reliance on debt financing.65
Positive
Cash Flow
CarMax demonstrates strong cash flow management with a significant improvement in free cash flow, growing by over 245% in the latest year. The operating cash flow to net income ratio is healthy at 1.87, suggesting effective cash generation relative to net earnings. The free cash flow to net income ratio is also favorable at 0.97.75
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 26.35B | 26.54B | 29.68B | 31.90B | 18.95B |
| Gross Profit | 2.90B | 2.71B | 2.80B | 3.29B | 2.38B |
| EBITDA | 1.03B | 1.04B | 1.02B | 2.09B | 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 | 19.22B | 19.53B | 18.93B | 19.27B | 15.53B |
| 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
Negative
59.13
Price Trends
60.00
Negative
63.21
Negative
71.37
Negative
Market Momentum
0.08
Positive
46.08
Neutral
34.26
Neutral
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 59.13 is below the 20-day moving average (MA) of 60.27, below the 50-day MA of 60.00, and below the 200-day MA of 71.37, indicating a bearish trend. The MACD of 0.08 indicates Positive momentum. The RSI at 46.08 is Neutral, neither overbought nor oversold. The STOCH value of 34.26 is Neutral, 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 (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | 5.93B | 12.69 | 15.20% | 0.43% | 19.75% | -10.74% | |
74 Outperform | 4.77B | 8.87 | 14.30% | ― | 8.39% | 40.35% | |
73 Outperform | 11.74B | 12.40 | 17.04% | 2.81% | 2.39% | 5.84% | |
73 Outperform | 8.54B | 9.84 | 12.75% | 0.65% | 10.25% | 9.08% | |
71 Outperform | $9.07B | 16.71 | 8.97% | ― | 3.17% | 42.14% | |
70 Outperform | 8.31B | 13.81 | 25.67% | ― | 3.15% | -12.49% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% |
* Consumer Cyclical Sector Average
Performance Comparison
KMX
CarMax
59.13
-18.08
-23.42%
ABG
Asbury
242.82
22.87
10.40%
AN
AutoNation
220.50
49.74
29.13%
GPI
Group 1 Automotive
458.25
77.23
20.27%
LAD
Lithia Motors
333.09
48.74
17.14%
PAG
Penske Automotive Group
177.81
24.85
16.25%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.