Copart, Inc. (NASDAQ:CPRT) closed at $27.32 on October 9. The stock has returned -17.8% during the last 6 months, compared to a 24.3% return for the Insider Monkey Billionaire Index and 15.1% for the State Street SPDR S&P 500 ETF Trust.
A business this profitable usually borrows against it. Copart has spent years doing the opposite, hoarding cash and paying no dividend at all. What it sells is other people’s misfortune, and misfortune is the one input a company cannot simply order more of.
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Scarce Land and a Captive Insurance Contract:
Copart auctions written-off cars for insurers, and the hard part of that business is having somewhere to put them. Salvage yards need large sites within reach of major cities, and no municipality is zoning new ones at a workable price. The yards Copart already owns cannot be replicated by a competitor with capital alone, which is the strongest kind of barrier there is.
The insurer side compounds it. An insurance company routes every write-off to a single auction network rather than splitting the work, so winning that contract wins the volume, and the volume is what brings the bidders. More bidders mean higher prices, which is what wins the next contract. The result is a 32.01% operating margin in a business that moves scrap metal, and a return on assets above ten percent with almost no borrowing behind it. Scarcity this hard almost never comes cheap, which is why Copart rarely appears among the undervalued quality stocks we screened.
Growth Has Nearly Stopped, and the Price Noticed:
Nothing in the accounts broke. Revenue grew 2.40% in the most recent quarter while earnings fell 17.40%, and the shares have trailed the market badly over six months. What changed is the growth rate rather than the margin, and a stock priced for compounding cannot slow down quietly. That repricing is most of the decline.
The deeper question is what happens to accident volumes over time. Safer vehicles and eventually autonomous ones reduce the supply of wrecked cars, which is the raw material of the whole business. Copart influences neither that nor used car values, which is a dependence none of the high-return picks we made in January carries.
The cash position is the defence. A current ratio near eight and essentially no debt mean this company can wait out a bad decade, which is exactly what the balance sheet appears designed for. A company able to wait that long is playing a different game from one chasing a quarter.
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The Valuation Case:
On earnings, the stock trades at 15.61 times forward against 17.63 trailing, on analyst consensus estimates. Enterprise value against EBITDA lands lower than the headline multiple suggests, because the cash pile is deducted from the enterprise value and there is a great deal of it.
The verdict is that Copart looks fairly valued and no longer expensive. The quality is not in dispute, and the price now reflects a business growing at low single digits rather than the double digits it once delivered. The company pays no dividend at all, which is unusual for a business this mature, and a cash pile that large usually means the market has stopped paying for the business underneath it. Copart is far from the only one in that position, and among the profitable businesses we found trading below value.
Conclusion:
Scarce salvage land and contracts that route an insurer’s entire volume to one network have built something close to a toll booth. The operating margin is one most industrial businesses never see, funded by a cash pile many times the size of the debt. However, revenue barely grew while earnings fell, and the long-term supply of written-off cars shrinks as vehicles get safer. Revenue growth reset this valuation, and nothing in the moat will fix that.
Market Sentiment:
Copart, Inc. was held by 60 hedge funds with a combined stake value of about $2.24 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 57 hedge fund holders with a cumulative investment value of around $1.64 billion in the previous quarter.
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This article is originally published at Insider Monkey.
