Copart: Profit In Clunkers

| About: Copart, Inc. (CPRT)

Cars are getting older and as insurance companies total instead of repair more older cars and new car sales are taking in clunkers for trade-ins someone has to dispose of all the scrap autos. This is where Copart (NASDAQ:CPRT) comes in. They recycle and scrap autos that are no longer serviceable. Investors are beginning to notice this stock as you can see from this hourly trading chart provided by Barchart:

In the past year while the market as measured by the Value Line Index was down 7% Copart was up 16% for the same period:

Copart, Inc. provides online auctions and vehicle remarketing services in the United States, Canada, and the United Kingdom. The company offers a range of services for processing and selling vehicles over the Internet through its Virtual Bidding Second Generation Internet auction-style sales technology, to vehicle sellers, primarily insurance companies, banks and financial institutions, charities, car dealerships, fleet operators, and vehicle rental companies.

Its services include online seller access, salvage estimation services, estimating services, end-of-life vehicle processing, virtual insured exchange, transportation services, vehicle inspection stations, on-demand reporting, DMV processing, flexible vehicle processing programs, member network, sales process, dealer services, direct services, and u-pull-it services, as well as CoPartfinder, an Internet-based used vehicle parts locator that provides vehicle dismantlers with resale opportunities for their purchases. The company sells its products to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, and exporters, as well as the general public. Copart, Inc. was founded in 1982 and is headquartered in Fairfield, California. (Yahoo Finance profile)

Factors to consider:

Barchart technical indicators:

  • 100% Barchart technical buy signal
  • Trend Spotter buy signal
  • Above its 20, 50 and 100 day moving averages
  • 6 new highs and up 2.18% in the last month
  • Relative Strength Index 62.15%
  • Barchart computes a technical support level at 26.46
  • Recently traded at 27.20 with a 50 day moving average of 26.26

Fundamental factors:

  • 7 Wall Street brokerage firms have the stock on their watch lists
  • Analysts project revenue will increase by 8.50% this year and another 6.30% next year
  • Earnings are estimated to increase by 32.40% this year, another 11.90%R next year and continue at an annual rate of 12.25% for 5 years
  • Analysts issued 1 strong buy, 4 hold and 2 under perform reports to their clients
  • If the numbers are met investors could see an annual total return of 10% - 12% over the next 5 years
  • The P/E ratio of 20.71 is higher than the market P/E of 14.00
  • At this time the stock pays no dividend but a stock split and share buy back program has increased investor interest
  • The Company has an A financial strength rating
  • Year over year the company has handled 10% more units
  • They have instituted higher fees
  • They see the UK as a growth market

Investor interest:

  • Although followed by only 7 Wall Street firms 1,366 readers of Motley Fool have given opinions on the stock
  • 97% of those voting think the stock will beat the market
  • The more savvy All Stars voted 98% for the same result
  • Although Jim Cramer was negative both Ron Baron and Zacks were more positive

CoPart has some tough competition in the older and used car market. While CPRT was up 3% in the last 50 trading sessions Autozone (NYSE:AZO) was down 1%, O'Reilly Automotive (NASDAQ:ORLY) up 9% and Carmax (NYSE:KMX) was down 15%:

Summary: Copart does have a few pluses. The analysts project increasing revenue and earnings. Both the professional and individual investor votes for above average price increases. The A financial Strength is nice. I'm not ready to buy until the stock has a larger following but if you own it closely monitor the 50 day moving average and the lower 14 day turtle channel:

Disclosure: I am long AZO.