Robert Freedland

Copart Rated a Sell

Great comments. I do not pick the titles of the entries. They are taken from my blog and Seeking Alpha thankfully assumes the role of editor. Please be aware of that.

As part of my blog, I have chosen when I comment on a stock to put in my five cents as to whether the stock is rated a "buy, sell or hold". When and if a more healthy environment in the financial world takes hold, Copart is a company I would hope would find a place in my own portfolio. As I tried to explain, I am having difficulty selling a stock from my holding and with a straight face tell readers they should either 'buy' or even 'hold' the same stock.

I am sure that you all, many of you who are more sophisticated in financial evaluations, will understand my own dilemma.

Copart: Good Technical Strength and Solid Fundamentals

I believe that Ranjit was discussing the apparent valuation problem for Copart (CPRT) when examined through the perspective of Price to Free Cash Flow. This is explained over at Investopedia:
www.investopedia.com/t...

"A valuation metric that compares a company's market price to its level of annual free cash flow. This is similar to the valuation measure of price-to-cash flow but uses the stricter measure of free cash flow, which reduces operating cash flow by capital expenditures. This is done as companies need to maintain or expand their asset bases (capital expenditure) to either continue growing or maintain the current levels of free cash flow.

n general, the higher this measure, the more expensive the company is considered. But it is useful also to compare to the company's past levels of price-to-free-cash flow along with comparing the average within its industry. For example, if a company generated $200 million in operating cash flow and spent $50 million on capital expenditure, then it generated free cash flow of $150 million. If the company currently has a market cap of $5 billion, the company trades at 33 times free cash flow ($5 billion/$150 million)."

With everything so nice at Copart (from my perspective), I do not know that this one particular measurement is a good reason to go 'short' on a stock. Of course, I didn't pay much attention to it....and went long!

I hope that answers your question. You aren't a dummy at all as I am not very familiar with this parameter of valuation either.