Copart: Driving Profits at Auto Auctions
04/25/2017 2:50 am EST
Each month, we add one stock to our model portfolio, chosen from among those stocks that have announced upcoming 2-for-1 stock splits, explains Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
Copart (CPRT) was the only 2-for-1 split announced in March, but it fills the bill nicely as the newest addition to the 2 for 1 model portfolio.
We owned shares of CPRT previously, over the period 4/12 through 10/14. It underperformed the portfolio as a whole, but still returned over 20%. Many of its numbers are quite good right now and it could do better this time around.
Copart operates a comprehensive world-wide online vehicle auction and re-marketing service, primarily selling vehicles for insurance companies, banks, and auto dealers.
Buyers are primarily dismantlers, used vehicle dealers, and exporters. Founded in 1982, but only incorporated in 2012, the company has grown to become a major player in this niche business. Revenue, profits, and return on investment have also grown at above average rates for this industry.
Volatility pretty much matches the market and the balance sheet is in line with industry averages. The biggest drag on its ranking score is the lack of a dividend. We’ll have to overlook that and focus on good growth and excellent profitability.
I like Copart for another reason. This company falls into the “someone’s got to do it” category. Selling wrecked and worn out cars is not a glamorous business.
Over 90 million shiny new vehicles are manufactured every year around the world and, eventually, they all wind up in the scrap heap. Copart has figured out how to profit on the trip from factory to junkyard.