Shares of used automotive vehicle retailer CarMax (KMX, Financial) jumped 4.71% today after the company reported third-quarter earnings results.
CarMax exceeded analysts' revenue expectations for this quarter, but same-store sales for used vehicles fell short. Additionally, EBITDA and EPS underperformed, indicating that while revenue was strong, profitability lagged.
CarMax (KMX, Financial), currently trading at $77.995, has a market capitalization of $12.17 billion. The stock shows a Price-Earnings (P/E) ratio of 30.47, Price-Book (P/B) ratio of 1.98, and an Enterprise Value (EV) of $30.70 billion, reflecting a significant scale in the used vehicle retail market. The GF Value indicates that the stock is fairly valued, which you can review in detail on the GF Value page.
From a warning signs perspective, CarMax has several medium and severe warnings. The Altman Z-Score of 1.79 falls in the distress zone, pointing towards a potential bankruptcy risk in the next two years. The decline in revenue per share over the past year and the long-term decline in gross margin are key areas of concern. The company has also been issuing new debt; over the past three years, it issued $3 billion worth of debt. Additionally, CarMax has experienced operating income losses in 67% of the past 12 quarters, and there has been insider selling activity with no insider buying in the last three months.
On the positive side, the Beneish M-Score of -2.86 suggests that CarMax is unlikely to be manipulating its financial statements. This gives a certain level of assurance amidst the warnings.
While the profitability metrics may be under pressure, CarMax’s gross margin stands at 10.35%. The EBITDA margin is at 6.21%, showing a moderate level of operational efficiency in its industry. Despite the challenges, CarMax is deemed a significant player in the market, with an aim to increase its U.S. market share from 3.7% to over 5% in the upcoming years.
Overall, CarMax (KMX, Financial) presents a mixed picture with strong revenue performance but challenges in profitability and financial stability. Investors should consider both the positive aspects and warning signs before making investment decisions.
