Copart, Inc. (CPRT)

By both methods, the value today (DCF $40 · Multiples $41) exceeds the market price ($26).

Today — fairly valued: at $26 trades ~35.7% below its value discounted to today (~$41); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($51) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$26.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($26) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-5.7%/year) than we project (5.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.9 bn of owner earnings in year 5 (vs ~$1.5 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on EV/NOPAT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Copart is valued as a single piece (there is no sum of the parts: the two reportable segments —United States and International— are geographic, and the fiscal 2026 10-K segment note defines them as before) on EV/NOPAT, the standard metric for a capital-light marketplace with immaterial SBC (0.8% of revenue). Year 0 is fiscal year 2026, ended Jul 31, 2026 (10-K filed Sep 29, 2026). Neither the Sep 10, 2026 release nor the 10-K carries numerical guidance: the gap is declared and year 1 starts from the normalized trajectory. Revenue grew 0.4% in the year (United States −1.2%, International +8.5%); the decline in the United States is explained in part by the one-off revenue from Hurricanes Helene and Milton in fiscal 2025 (per the 10-K), so year 1 compares against a clean base. The last two quarters grew 2.1% and 2.4%. The base starts at 3.5% and rises gradually to 6.5% by year 5 (a recovery with a named cause: clean comparison, new capacity and international), below the ~10% annual pace of fiscal 2023-2025; the adverse case stresses year 1 at 0.4% (the pace of the year) and ends at 3.0%; the favorable case starts at 5.5% and reaches 9.5%. The operating margin for the year was 35.4% (36.5% in 2025); the fourth quarter closed at 32.0% because of general and facility expenses. The base starts at 35.4% and recovers 1.4 points to 36.8% by year 5 (same cumulative gain as the previous path); the adverse case erodes it 0.4 points per year to 33.5% and the favorable case takes it to 38.5%. No financial debt (long-term liabilities are leases of ~US$86M, immaterial) and cash of US$4.49bn: US$1.91bn of cash, equivalents and restricted cash plus US$2.58bn in held-to-maturity Treasury bills (10-K balance sheet). The company repurchased US$1.63bn in fiscal 2026 —with no repurchases in the two prior years— and the fourth-quarter diluted count is 932.1M shares; the path projects 1.8% per year and is identical in all three scenarios. Pending transaction: on Sep 10, 2026 Copart signed an agreement to acquire ACV at US$10.50 per share in cash (equity value of ~US$1.9bn; closing expected before the end of 2026, subject to a majority tender offer and antitrust approval). The valuation is standalone: it includes neither ACV's results nor the US$1.9bn of cash that will be used, and this is declared as a risk. Calculations: fiscal-year NOPAT of US$1.333bn (EBIT of US$1,653M × (1 − 19.3%)); D&A of US$229M; capex of US$337M split 50% maintenance / 50% growth; owner earnings of US$1.185bn. Reported FCF was US$1.267bn.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $51 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $26, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $51 in 5 years and a required return of 4.5% annually, the maximum to pay today is $41. Against the current market price ($26), the margin of safety is 35.7% (trades below the maximum → there is margin) and the total return at that price would be 14.1% annually.

• Decline in the stock. A decline tied to the real growth deceleration more than to a one-off event.
• Estimated 5-year return (base). +14% annual return against the current price, valuing on EV/NOPAT within the marketplace band.
• Exit multiple vs. the archetype band. 22× EV/NOPAT, within the marketplace band [18-25×], in the upper half from the exceptional return on capital but moderated by the recent growth deceleration.
• Margin of safety today. It trades at a real discount to value, though short of the required margin of safety.
• Sensitivity to the adverse scenario. The adverse scenario (growth stressed from the fiscal 2026 pace and an eroding margin) is compared against the current price in the scenario table; the cushion depends on whether the slowdown reverses.
• Entry vs. exit comparison. The implied entry multiple today against the fiscal-year NOPAT compresses going forward as the business grows, making the entry cheaper if the base path is met.
• Terminal multiple risk. A 22× requires the business to keep compounding through year 5 (6.5% terminal growth); if the United States slowdown proves deeper, the defensible multiple would be lower.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✕ High incremental ROIC (compounding)
• ✓ CFROIC backs up the ROIC (89%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on invested capital. Approximately 30% on real invested capital from the balance sheet (no debt), well above the 10% bar and the 20% threshold the method considers exceptional.
• Incremental return. −25.4% in fiscal 2026: NOPAT fell while invested capital grew, so the new capital added no return that year; the total level (~29%) remains exceptional.
• Cash generation. Reported FCF of fiscal 2026 of US$1.27bn on NOPAT of US$1.33bn — high cash conversion, consistent with the capital-light nature of the fee-based business.
• SBC as a percentage of flow. Stock-based compensation of only 3.1% of FCF in fiscal 2026 (US$38.8M), far below the materiality threshold (15-20%) that would trigger the SBC trap.
• Reinvestment runway. Fiscal 2026 capex fell 41% against the prior year (nine new openings); if the geographic expansion runway runs out, future growth would depend more on price than on volume.
• Earnings quality. No significant CECL accruals or credit reserves (not a lender); accounting earnings and operating cash move together.
• Sensitivity to the accident cycle. The volume of total-loss vehicles depends on factors outside the company's control (weather, accident rate, automotive safety advances).

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The volume driver (units processed) is not broken out as a figure in the 10-K or the release; service revenue and vehicle sales revenue are the levels available from the filing. The insurer share fell to 79% of units in fiscal 2026 (81% in 2025 and 2024). The average age of cars on the road is 13.0 years in 2026 (11.4 in 2013, per the 10-K).

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-jul-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Historical consolidated growth. ~10% annually in FY2023-FY2025, slowing to 0.4% in fiscal 2026 — a recent and verifiable change of regime, not the noise of a single quarter.
• International segment growth. +8.5% in fiscal year 2026 (partly from exchange rates), the current growth engine while the United States contracts.
• United States contraction. −1.2% in fiscal year 2026, 82% of consolidated revenue, with the comparison effect against the one-off hurricane revenue of fiscal 2025.
• Trough-and-recovery signal. The last two quarters (+2.1% and +2.4%) improved against the first half of the year, an early sign that the slowdown may be bottoming; the fourth quarter, however, had lower earnings.
• Company guidance. Neither the fiscal fourth-quarter 2026 earnings release nor the 10-K carries numerical guidance; gap declared after reading the documents.
• TAM runway. Total total-loss vehicles processed globally remains a fraction of the worldwide vehicle fleet; the filing does not quantify total penetration.
• Price-per-vehicle driver. The filing mentions mix and auction-price improvements as part of historical growth, without disaggregating an exact price-per-unit figure.

• Business recurrence. The flow of salvage vehicles is structural as long as accidents and auto insurance exist; it does not depend on fashion or on a product that could become obsolete in the short term.
• Pricing power. Fees set by the platform without case-by-case negotiation with each buyer; the filing does not quantify price elasticity.
• Seller concentration. No individual client exceeded 10% of consolidated revenue in FY2023-2025, though historically a limited number of insurers accounted for a substantial portion of revenue.
• Threat of technological disintermediation. Collision-avoidance systems and, eventually, autonomous vehicles could structurally reduce the total-loss rate over the long term.
• Behavior during a slowdown. Consolidated growth slowed to 0.4% in fiscal 2026 with the United States contracting, a real and recent change of trend against the ~10% of the previous three years.
• Geographic diversification. Operations in 11 countries reduce dependence on a single regulatory or macroeconomic market, and the international segment partially offsets the United States deceleration.
• Differentiated product vs. commodity. The VB3 platform and real-time data systems differentiate Copart from a generic physical auction, though the filing does not quantify the price premium obtained.

• ✓Leverage (net debt / EBITDA)Net cash $4.5 bn
• –Interest coverage (EBIT / interest)no data
• ✓Liquidity (current ratio)7.91×
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 89% of ROIC
• ✓Value creation (ROIC − 10% bar)+19pp
• ✕Malinvestment test (capex vs incremental ROIC)Investment mode 1.5x with incremental ROIC < cost of capital
• !Float / working capitalConsumes cash $0.2 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.8% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Financial debt. Zero financial debt; the only long-term liabilities are operating leases of ~US$93M, immaterial against the balance sheet.
• Cash and equivalents. US$4.49bn in cash, equivalents and held-to-maturity Treasury bills at Jul 31, 2026 (US$1.91bn of cash and restricted cash plus US$2.58bn of bills), several times total current liabilities (US$704M).
• Current liquidity. Current assets of US$5.2bn against current liabilities of US$685M, a very comfortable current ratio.
• Interest coverage. Not applicable: the company pays no interest on financial debt, and in fact earns net interest income on its cash.
• Use of excess cash. The year's repurchase consumed cash in addition to operating FCF (cash and bills fell US$0.3bn), and the pending ACV purchase (~US$1.9bn) will use an additional part; the balance sheet remains very solid.
• Currency exposure. 18% of revenue comes from international operations (pound, euro, Brazilian real), which introduces exchange rate sensitivity in the dollar-denominated consolidated figures (favorable effect of US$34M in fiscal 2026).

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

In fiscal year 2026 the company directed the vast majority of allocated capital to share repurchases (US$1.63bn) and a smaller portion to growth capex (~US$169M, 50% of capex). It pays no dividend. The repurchase exceeded real FCF (US$1.27bn) and was funded with cash and Treasury bills. On Sep 10, 2026 the purchase of ACV for ~US$1.9bn in cash was announced, with closing expected before the end of 2026; the 10-K states that the company is considering alternative uses of the remaining cash, in addition to the repurchase.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Founder's skin in the game. Willis J. Johnson holds 5.75% of shares outstanding, a material though minority alignment.
• Chief executive transition. The 8-K of 29-Jun-2026 reports that A. Jayson Adair returns as chief executive from 31-Jul-2026, replacing Jeffrey Liaw, and states that Liaw's departure is not the result of any disagreement over the company's financial reporting, policies or practices; Liaw remains a senior advisor for one year.
• M&A track record. Staged geographic acquisitions since 2003 (Canada, United Kingdom, United Arab Emirates, Brazil, Germany, Spain, Bahrain, Oman, Ireland, Finland, Purple Wave 2024), with no diworsification signals reported in the filing.
• Recent shift in capital allocation. A material US$1.63bn repurchase in fiscal 2026 after years without significant repurchases, plus a cash acquisition of ~US$1.9bn announced on Sep 10, 2026; the sustainability of both against real FCF (US$1.27bn) remains to be seen.
• No dividend. Copart pays no dividend; all capital return runs through buybacks, which requires them to be executed at a good price to avoid destroying value.

• Fiscal 2026 revenue grew only 0.4% against a market used to ~10% annually, and the fourth quarter closed with net income −17.4% year over year and an operating margin of 32.0% — motivated sellers, not an unknown catalyst
• On Sep 10, 2026, together with the results, Copart announced the purchase of ACV for ~US$1.9bn in cash, and the share price fell on the announcement
• The United States segment (82% of revenue) is the one decelerating; the market punished the consolidated figure without distinguishing that the international segment grew 8.5%

The decline in the share price has identifiable causes: genuinely slowed consolidated growth, margin compression in the fourth quarter, and a cash acquisition announced the same day. It is a case of motivated sellers (unmet growth and margin expectations, concern over the use of cash) rather than absent buyers; the business continues to generate a return on capital of ~29% and retains its network moat.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +2%/year (+11% total): the margin of safety protects the downside. The bull (+20%/year, +152% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Department of Justice investigation. Ongoing investigation into alleged anti-money-laundering violations on the auction platform; could lead to litigation, fines, sanctions, or reputational damage.
• Structural reduction in the total-loss rate. Collision-avoidance systems and, eventually, autonomous vehicles could reduce the accident rate and, with it, the supply of vehicles that feeds the business.
• Disintermediation by large dismantlers. LKQ Corporation and dismantler groups can buy total-loss vehicles directly from insurers, bypassing Copart's auction.
• Concentration among a limited number of large sellers. Sellers have canceled agreements in the past in particular markets, affecting revenue in those specific markets.
• Cybersecurity. The business depends entirely on the VB3 platform and proprietary systems (G2); a subsidiary suffered a ransomware attack in March 2023.
• United States deceleration does not reverse. If the improvement of the last two quarters (+2.1% and +2.4%) is not sustained, the base path would be over-optimistic and the defensible multiple would be lower than the current one.
• Pending ACV acquisition. A cash purchase of ~US$1.9bn (US$10.50 per share), with closing expected before the end of 2026 and subject to a majority tender and antitrust approval; the valuation is standalone and does not include it.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 29% above the 10% bar, but the margin is limited (+36%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 5% at a multiple/growth of 3.0 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 8% (EBIT/EV) + ROIC 29% → makes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -6% vs our 5%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +2%/yr, bull-scenario ceiling +20%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: network effects, cost advantage, intangibles, switching costs, efficient scale → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -6%, within what we project (5%) — the story squares with the numbers.